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HIBERNIA DEVELOPMENT PROJECT
EL1093/PLIOO5 ROYALTY AGREEMENT
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HIBERNIA DEVELOPMENT PROJECTEL1093/PL 1005 ROYALTY AGREEMENT
INDEX
Article Headings
PART I: PREAMBLE AND STRUCTURE 12
ARTICLE I: NATURE AND RELATIONSHIP OF AGREEMENT AND ROYALTY 12
1.1 Nature of Agreement 12
1.2 RelatIonship to Legislation and Regulations 12
ARTICLE II: DEFINITIONS 12
2.1 Definitions 12
2.2 DefinitIons Within Articles 13
ARTICLE III: SCHEDULES 13
3.1 Schedule References 13
3.2 Interpretation of Agreement and Schedules 13
ARTICLE IV: INTER PRETATION 13
4.1 Divisions and Headings 13
4.2 Part, Article, Clause, Subciause and item References 13
4.3 Statutes, Regulations and Rules 13
ARTICLE V: ACCOUNTING 14
5.1 Terms 14
5.2 Accounts 14
5.3 Canadian Generally Accepted Accounting Principles and Guidelines 14
5.4 Consistent Application 14
5.5 No Double Counting 14
ARTICLE VI: ADMINISTRATION AND INDEPENDENCE OF AGREEMENT 15
6.1 Separate Treatment 15
6.2 Consistent Treatment 15
6.3 Independent InterpretatIon 15
ARTICLE VII: EFFECTIVE TIME AND TERM 15
7.1 EffectIve Time 15
7.2 Term 16
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7.3 LimItation of Project Withdrawal .16
7.4 Continuation of Agreement 16
PART II: PARTICIPANTS AND ARRANGEMENTS 16
ARTICLE VIII: PARTNERSHIPS 16
8.1 LiabIlity of Partners 16
8.2 Change in Partnerships 16
8.3 NotIce of Change of Partners 16
8.4 Successor Partnerships 16
ARTICLE IX: LICENSEES 17
9.1 ExxonMobli Liability for ExxonMobii Partnership 17
9.2 No Reduction of ExxonMobll Liability 17
9.3 Chevron Liability for Chevron Partnership 17
9.4 No Reduction of Chevron Liability 17
9.5 Suncor Liability for Petro-Canada Partnership 18
9.6 No Reduction of Suncor Liability 18
ARTICLEX: OPERATORS 18
10.1 Activities of Operators 18
10.2 ThIs Clause Intentionally Left Blank 18
10.3 Change of Operators 19
10.4 Compliance with Agreement by Resource Project Operators 19
ARTICLE Xl: RIGHTS AND OBLIGATIONS OF PROJECT OWNERS AND LICENSEES 19
11.1 Project Owners 19
11.2 Licensees 19
ARTICLE XII: REPRESENTATIONS 20
12.1 Partnerships 20
12.2 Corporations 20
12.3 Province 20
ARTICLE XIII: SECURITY 20
13.1 Security 20
13.2 Security Valid Upon Execution 21
13.3 Enforcement 21
13.4 Remedies on Default 21
13.5 Sale by the Province 22
13.6 Powers of the Receiver 2
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13.7 Expenses .23
13.8 Representation of Grantors 23
13.9 Reporting and Notices 23
13.10 FurtherAssurances 23
13.11 Power of Attorney 24
13.12 Trust Provision 24
13.13 Acknowledgement of Termination of Security 24
13.14 Use by Province of Shuttle Tankers and Temporary Replacement Tankers to Effect Security 25
ARTICLE XIV: PROJECT OWNERS’ AGREEMENTS 25
14.1 Operating Agreements 25
14.2 Project Owners’ Lifting Agreement 26
14.3 ProvIncial Approval 26
ARTICLE XV: JOINT ACCOUNT 26
15.1 Joint Account 26
15.2 Replacement of Joint Account 26
15.3 Compliance by Operators 27
ARTICLE XVI: PRESENT INTERESTS AND SUCCESSORS 27
16.1 Working Interests In the Resource Projects 27
16.2 Consistent Working Interests 28
16.3 RestrIctions on Dispositions and Novatlons 28
16.4 NotIce of Dispositions 28
16.5 Licence Allocation 28
16.6 Further Restriction on Dispositions 29
16.7 NotIce of Disposition and Novatlon 29
16.8 RestrictIons on Security Interests 30
16.9 Postponement of Certain Other Liens 31
16.9A Novation of Allocation Agreement 32
16.10 Successors 32
16.11 Division of Liability Between Predecessor and Successor 33
16.12 Successor’s Liability 33
16.13 Treatment of Sale Consideration 35
16.14 Limitation on Marketing Costs 36
16.15 Interpretation 36
PART Ill: ROYALTY PROVISIONS 36
ARTICLE XVII: SCOPE OF PROJECT FOR ROYALTY PURPOSES ...
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17.1 Hibernia Crude EL1093/PLIOO5 .36
17.2 Natural Gas Consumed 36
17.3 Natural Gas Royalty 36
17.4 Processing and Storage 37
ARTICLE XVIII: ROYALTY STRUCTURE 37
18.1 Grant of Royalties 37
18.2 Generally 38
18.3 Separate Liability for Royalty 38
18.4 Separate Determinations by Project Owners 38
18.5 Risk In Transport 38
ARTICLE XIX: GROSS ROYALTY 38
19.1 Gross Royalty Term 38
19.2 Gross Royalty Payable 38
19.3 Gross Royalty Rates 39
ARTICLE XX: NET ROYALTY 39
20.1 Net Royalty Term 39
20.2 Annual Net Royalty Amount 39
20.3 Monthly Calculation 39
20.4 Credit of Gross Royalty 39
20.5 Net Royalty Surplus 39
20.6 For Greater Certainty 40
20.7 Excess Eligible Costs 40
ARTICLE XXI: SUPPLEMENTARY ROYALTY 40
21.1 Supplementary Royalty Term 40
21.2 Annual Supplementary Royalty Amount 40
21.3 Monthly Calculation 41
21.4 Deduction of Gross Royalty 41
21.5 Supplementary Royalty Surplus 41
21.6 Supplementary Royalty Index 41
ARTICLE XXIA: ADDITIONAL ROYALTY 41
21A.i Additional Royalty Term 41
21A.2 Annual Additional Royalty Amount 42
21A.3 Monthly Calculation 42
214.4 Deduction of Gross Royalty 42
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214.5 Additional Royalty Surplus .42
ARTICLE XXII: TAKING IN KIND 43
22.1 ProvincIal Right 43
22.2 NotIce by Province 43
22.3 Adjustment at End of Take in Kind Period 43
22.4 ProvIncial Costs 43
22.5 Royalty Lifting Agreement 43
22.5A Obligations of Project Owners 44
22.6 Transportation and Storage for the Province 45
22.7 Royalty Entitlement Prior to Payout 46
22.8 Royalty Entitlement After Payout 46
22.8A Shrinkage 46
22.9 Voiume on Account of Recalculations, interest and Arbitratlons 46
22.10 Volume on Account of Annual Reconciliation 47
22.11 Estimates 47
22.12 AdJustment of EstImates 47
22.13 AccumulatIon of Royalty Taken In Kind 48
22.14 Deemed Payment for Certain Calculations 48
22.15 Unpaid Royalty Share 48
22.16 Supplementary Interest Provisions 48
22.17 Cessation of Production 49
ARTICLE XXIII: This Article Intentionally Left Blank 49
ARTICLE XXIIIA: INITIAL CALCULATION RULES 49
23.14 Initial Balances 49
ARTICLE XXIV: CALCULATION AND PAYMENT 49
24.1 Initial Determination and Calculation by the Project Owner 49
24.14 Production Allocation to Royalty Area 50
24.IB EL1093/PLIOO5 Royalty Area Sales Volume 50
24.2 Remittance 50
24.3 Redetermination and Recalculation by Province 50
24.4 Payment Upon Redetermination or Recalculation 51
24.5 Arbitration 51
24.6 Time and Manner of Payment 51
24.7 Annual Reconciliation and Adjustment 51
24.8 Inventory 5
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24.9 No Set-Offs .52
24.10 Non-Arm’s Length Allowance 52
24.11 Non-Arm’s Length Notice 52
24.12 Arm’s Length Threshold 52
24.13 ApplicatIon of Receipts 53
24.14 Advice Re: Events 53
ARTICLE XXV: INTEREST AND PENALTIES 53
25.1 interest Payable by Province: Generally 53
25.2 interest Payable by Province: Arbitration Awards 53
25.3 Interest Payable to Province: Generally 54
25.4 Interest Payable: Annual Adjustments 54
25.5 Penalty on Non payments 54
25.6 Audit Upon Nonfiiing 54
25.7 Occurrence of Material Default 55
25.8 Termination of Agreement 55
25.9 Notice to Project Lenders 55
25.10 Reimbursement of Certain Costs 55
25.11 ArtificIal Transactions 56
25.12 No Interest or Penalties While Royalty Share To Be Taken in Kind Accumulates 56
25.13 NomInal Rate Method of Interest Calculation 56
ARTICLE XXVI: RECORDS AND AUDIT 56
26.1 Accounts of the Resource Project Operators 56
26.2 Project Owner’s Accounts 56
26,3 Annual Information 57
26.4 Monthly Summary 57
26.5 Translation of Currency 58
26.6 Audits and inspections 58
26.7 This Clause Intentionally Left Blank 58
26.8 Preservation of Records 58
26.9 Access and Seizure 58
26.10 Certified Copies 59
26.11 Legislative and Regulatory Action 59
26.12 Rights in Other Jurisdictions 59
26.13 Non-Availability of Records 59
26.14 ConfidentIality 60
26.15 Environmental insurance Policies 601P( 1’
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ARTICLE XXVIh ARBITRATION .61
27.1 SubmissIon to Arbitration 61
PART IV: COSTS 61
ARTICLE XXVIII: PRE-DEVELOPMENT COSTS 61
28.1 Amount 61
ARTICLE XXIX: RESOURCE PROJECT ELIGIBLE COSTS 61
29.1 QualIfication of Resource Project Eligible Costs 61
29.2 Qualification of Resource Project Eligible Marketing Costs 62
29.3 DisqualifIcation 62
29.4 Allocation of Costs 64
29.5 Allocation Among Project Owners 64
29.6 This Clause Intentionally Left Blank 65
29.7 Insurance Premiums 65
29.8 Tariffs 65
ARTICLE XXX: APPLICATION RULES FOR RESOURCE PROJECT COSTS 65
30.1 Capital and Operating Costs Determination 65
30.2 Pre Production Start-Up 65
30.3 Discounts 65
30.4 TaxCredits 66
30.5 Disposals Within A Year of Acquisition 66
30.6 Resource Project Capital Costs Uplift 66
30.7 Resource Project Operating Costs Uplift 66
30.8 Certain Resource Project Costs Not Uplifted 66
30.9 AffIliates 66
30.10 Capital Leases Etc 66
30.11 Repair and Maintenance 67
30.12 Independent Operations 67
30.13 Not Available For Use 67
30.14 Sale of Working lnterest 67
30.15 Non-Arm’s Length Transactions 67
30.16 Dispositions 68
30.17 Payments in Advance 68
30.18 Common Costs 68
30.19 Environmental insurance Deductibles 68
3020 Certain Expressly Allowed Expenses 68 J
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30.21 Exclusion of Amounts Remitted .69
ARTICLE XXXII: This Article IntentIonally Left Blank 69
ARTICLE XXXIII: This Article Intentionally Left Blank 69
ARTICLE XXXIIIA: ELIGIBLE TRANSPORTATION COSTS DEDUCTION-EL1093/PLIOO5 69
33.IA This Clause Intentionally Left Blank 69
33,2A Eligible Transportation Costs Deduction 69
33.3A Excess Eligible Transportation Costs 69
ARTICLE XXXIV: ABANDONMENT AND DECOMMISSIONING 69
34.1 Agreed PrInciples 69
34.2 UnderstandIngs Re Reserves 70
ARTICLE XXXV: RETURN ALLOWANCES 70
35,1A Commencement of Return Allowance Accumulation 70
35.1 Before Production Start-Up 70
35.2 After Production Start-lip 70
35.3 Project Withdrawal 70
35.4 De Mlnimus Non Curat Lex 70
ARTICLE XXXVI: RESERVES 71
36.1 Certain Allowed Reserves 71
36.2 ProvisIons Re Allowed Reserves 71
ARTICLE XXXVII: CRUDE OIL VALUATION 72
37.1 General 72
37.2 Monthly Information 72
37.3 Information Provided by Province 72
37.4 Review by Arbitrators 72
37.5 Sale Prices Not Uniform 72
PARTV: GENERAL 73
ARTICLE XXXVIII: GOVERNING LAW 73
38.1 Governing Law 73
38.2 Attornment 73
38.3 Address for Service of Legal Process 73
ARTICLE XXXIX: NOTICES 73
39.1 Form and Delivery 73
39,2 Deemed Delivery .‘, 75
39.3 Change of Address 75
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ARTICLE XL: MISCELlANEOUS .75
401 Prior Agreements 75
40.1A Stability 75
40.2 Inurement 75
40.3 RelatIonship of Parties 76
40.4 Waiver in Writing 76
40.5 Delay Not Waiver 76
40.6 Acceptance of Payment Not Waiver 76
40.7 TIme of the Essence 76
40.8 Further Assurances 76
40.9 No Additional Equity 76
ARTICLE XLI: EXECUTION 77
41.1 Partnership Execution 77
41.2 Counterpart ExecutIon 77
Schedule “A” Definitions Applicable to the Agreement 80
Schedule “B” This Schedule Intentionally Left Blank 94
Schedule “C” Assignment and Novation Agreement 95
Schedule D” Security Holder Agreement 102
Schedule “E” Confidentiality DeclaratIon 109
Schedule “F” Operator’s Agreement 111
Schedule “G” Operator’s Acknowledgement Agreement 117
Schedule “H” Locked Provisions EL 1093 and PL 1005 120
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HIBERNIA DEVELOPMENT PROJECTPLIOO5/EL1093 ROYALTY AGREEMENT
THIS AGREEMENT MADE the 16th day of February, 2010,
AMONG:
HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR (referred to herein as the “Province)
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EXXONMOBIL CANADA LTD., a body corporate, incorporated pursuant to the laws of Canada, having its headoffice in the City of Calgary, in the Province of Alberta (referred to herein as “ExxonMobiI)
-and -
EXXONMOBIL CANADA PROPERTIES, a general partnership, formed and existing under the laws of the Provinceof Alberta, having its head office in the City of Calgary, in the Province of Alberta (referred to herein as“ExxonMobil Partnerships)
-and
EXXONMOBIL CANADA HIBERNIA COMPANY LTD., a body corporate, incorporated pursuant to the laws ofCanada, having its head office in the City of St. John’s, in the Province of Newfoundland and Labrador (referredto herein as‘4ExxonMobil Hibernia)
-and-
CHEVRON CANADA RESOURCES, a partnership established under the laws of the Province of Alberta, having anoffice in the City of Calgary, in the Province of Alberta (referred to herein as “Chevron Partnership)
-and-
CHEVRON CANADA LIMITED, a body corporate, incorporated pursuant to the laws of Canada, having its headoffice in the City of Calgary, in the Province of Alberta (referred to herein as “Chevron)
-and -
SUNCOR ENERGY INC., a body corporate, amalgamated pursuant to the laws of Canada, having its head officein the City of Calgary, in the Province of Alberta (referred to herein as “Suncor”)
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PETRO-CANADA HIBERNIA PARTNERSHIP, a partnership established under the laws of the Province of Alberta,having an office in the City of St. John’s, in the Province of Newfoundland and Labrador(referred to herein as “Petro-Canada Partnership)
-and-
MURPHY ATLANTIC OFFSHORE OIL COMPANY LTD., a body corporate incorporated pursuant to the laws ofCanada, having an office in the City of Calgary, in the Province of Alberta (referred to herein as “Murphy Oil”)
-and-
CANADA HIBERNIA HOLDING CORPORATION, a body corporate incorporated pursuant to the laws of theCanada, having an office in the City of Calgary, in the Province of Alberta (referred to herein as “CHHC”)
-and
STATOIL CANADA LTD., a body corporate, amalgamated under the laws of Alberta, having its head offic in theCity of Calgary, in the Province of Alberta (referred to herein as “Statoil”)
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NALCOR ENERGY — OIL AND GAS INC. a body corporate incorporated pursuant to the laws of the Province ofNewfoundland and Labrador, having an office in the City of St. John’s, in the Province of Newfoundland andLabrador (referred to herein as “Nalcor Oil”)
(referred to herein collectively as the “Parties” and individually as a “Party”)
WHEREAS:
I. Section 33 of the Petroleum and Natural Gas Act authorizes the Province to make an agreement that isinconsistent with the Royalty Regulations.
2. The Parties hereto wish to set forth in this Agreement the rights and obligations agreed to as regards tothe payment of royalties, interest and penalties with respect to Hibernia Crude-EL1093/PLIOO5.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT for and in consideration of the mutual promises setout in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the Parties agree as follows:
PART I: PREAMBLE AND STRUCTURE
ARTICLE I: NATURE AND RELATIONSHIP OF AGREEMENT AND ROYALTY
1.1 Nature of Agreement
This Agreement is a contract entered into for consideration among the Project Owners, the Licenseesand the Province.
1.2 Relationship to Legislation and Regulations
(a) The Province and the Project Owners agree that the calculation and payment methodology and theadministration relating to royalties in respect of PLIOOI, PLIOO5 and E11093 shall be consistent insimilar circumstances.
(b) The Province and the Project Owners acknowledge and agree that this Agreement comprehensivelyaddresses the calculation, payment and administration relating to royalties in respect of P11005 andEL1093.
(c) This Agreement is made under subsection (1) of section 33 of the Petroleum and Natural Gas Act.
(d) Subject to subclause 2.1(d) of the Allocation Agreement, this Agreement is inconsistent with theRoyalty Regulations, 2003 made under Part II of the Petroleum and Natural Gas Act or any otherregulation promulgated under Part II of the Act and this Agreement shall prevail within the meaning ofsubsection (2) of section 33 of the Act.
ARTICLE II: DEFINITIONS
2.1 Definitions
Subject to clause 2.2, the words and phrases used in this Agreement for which definitions are given inSchedule “A” shall have the meanings given thereto in Schedule “A”.
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2.2 Definitions Within Articles
Words and phrases defined within a particular Article or clause of this Agreement and stated to bedefined only for the purposes of the Article or clause, as the case may be, shall have the meaning given theretoonly within the Article or clause as stated and shall not have that meaning elsewhere in this Agreement.
ARTICLE III: SCHEDULES
3.1 Schedule References
References herein to a Schedule shall mean a reference to a Schedule to this Agreement. Referencesin a Schedule to “the Agreement” shall mean a reference to this Agreement.
3.2 Interpretation of Agreement and Schedules
This Agreement and all of the Schedules to this Agreement constitute one and the entire agreementamong the Parties hereto and, accordingly, this Agreement and all of the Schedules to this Agreement shall beinterpreted and enforced as though the provisions of all of the Schedules to this Agreement were set forth inthis Agreement prior to the execution page hereof and without giving paramountcy to the provisions of thisAgreement or any of the Schedules to this Agreement over the provisions of the other.
ARTICLE IV: INTERPRETATION
4i. Divisions and Headings
The division of this Agreement into Parts, Articles, clauses, subclauses and items and the insertion ofheadings are for convenience of reference only and shall not affect or be considered in the construction orinterpretation of this Agreement.
4.2 Part, Article, Clause, Subclause and Item References
References herein to a Part, Article, clause, subclause or item shall mean a reference to a Part, Article,clause, subclause or item within the body of this Agreement. References herein to a subclause withoutidentifying the clause containing the subclause referred to, shall mean a reference to such subclause within theclause in which the reference is made. References herein to an item without identifying the clause orsubclause in which the item is contained shall mean a reference to the item in the same clause or subclausewhere the reference is made.
4.3 Statutes, Regulations and Rules
Any reference in this Agreement to all or any part of any statute, regulation or rule shall, unlessotherwise expressly stated herein, be a reference to the statute, regulation or rule, or part thereof, as amendedfrom time to time.
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ARTICLE V: ACCOUNTING
5.1 Terms
All accounting terms riot otherwise defined in this Agreement shall have the meanings assigned tothem in accordance with Canadian generally accepted accounting principles, except where inappropriate in thecontext in which such accounting term is used in this Agreement.
5.2 Accounts
All accounts maintained for the purposes of this Agreement by each of a Project Owner, a ResourceProject Operator and the Unit Operator shall be maintained in accordance with the provisions of thisAgreement and, to the extent not inconsistent therewith, with Canadian generally accepted accountingprinciples and guidelines and with good petroleum industry practices. The Joint Account-PLIOO5 shall bemaintained by the PLIOO5 Project Owners in accordance with the provisions of the PLIOO5 JOA and, to theextent not inconsistent therewith, with Canadian generally accepted accounting principles and good petroleumindustry practices. The Joint Account-EL1093 shall be maintained by the EL1093 Project Owners in accordancewith the provisions of the EL1093 JOA and, to the extent not inconsistent therewith, with Canadian generallyaccepted accounting principles and good petroleum industry practices. The provisions of this Agreement, theprovisions of the Joint Account-PLIOO5 and Joint Account-EL1093, Canadian generally accepted accountingprinciples and guidelines and good petroleum industry practices, to the extent that each is not inconsistentwith the preceding, shall be adhered to in the determination and treatment of costs for the purposes ofcalculating Gross Transfer Revenue and Net Transfer Revenue.
5.3 Canadian Generally Accepted Accounting PrInciples and Guidelines
Where the handbook, as amended from time to time, published by the Canadian Institute of CharteredAccountants includes a relevant statement of a principle or guideline of accounting, such statement shall bethe generally accepted accounting principle or guideline applicable at the time to the circumstances that itaddresses, except where the principle or guideline is not consistent with the provisions of this Agreement or isnot consistent with the provisions of the PLIOO5 JOA and the EL1093 JOA constituting the Joint AccountPLIOO5 and Joint Account-EL1093, respectively.
5.4 Consistent Application
The accountingterms, principles, guidelines and practices initially adopted by each of a Project Owner,a Resource Project Operator and the Unit Operator for the purposes of this Agreement shall, subject to theforegoing provisions of this Article, be applied by it on a consistent basis from Period to Period and shall not bechanged for the purposes of this Agreement unless agreed to by the Province, such agreement not to beunreasonably withheld.
5.5 No Double Counting
(a) A cost or revenue or part of a cost or revenue that has been claimed, deducted or included by aProject Owner in the calculation of Royalty Share cannot be claimed, deducted or included byanother Project Owner in its calculation of Royalty Share under the Licences.
(b) A cost or revenue or part of a cost or revenue that has been claimed, deducted or included by aProject Owner under this Agreement in the calculation of Royalty Share cannot be claimed Jj/deducted or included by that Project Owner or an owner in another production licence(s) issued ‘\Aby the Board in the Offshore Area in the calculation of royalty share under such licence(s).
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(c) A cost or revenue or part of a cost or revenue that has been claimed, deducted or included byan interest holder in the calculation of its royalty share in a production licence issued by theBoard in the Offshore Area other than the Licences shall not be claimed, deducted or includedby any Project Owner in a calculation of Royalty Share under PLIOO5 or EL1093, as applicable.
(d) An Actual Cash Payment may constitute one, but not more than one, of (i) a Resource ProjectEligible Cost, (ii) a Resource Project Eligible Marketing Cost, (iii) an Eligible Transportation Costor (iv) a deduction in calculating Gross Transfer Revenue. A revenue item may constitute one,but not more than one, of a Resource Project Incidental Revenue or a Gross Sales Revenue.
ARTICLE VI: ADMINISTRATION AND INDEPENDENCE OF AGREEMENT
6.1 Separate Treatment
The Province shall deal separately with each Project Owner and Licensee in the administration of thisAgreement. The actions taken or not taken, any waivers granted or any benefits or indulgences conferred bythe Province with respect to any one Project Owner or Licensee shall not prejudice or limit the Province in itsdealings with another Project Owner or Licensee with respect to any similar matter or any other matterwhatsoever.
6.2 Consistent Treatment
Notwithstanding the provisions of clause 6.1, the Province shall, in similar circumstances, afford similartreatment to each Project Owner and Licensee to that afforded another Project Owner or Licensee, as the casemay be. In the event that a Project Owner or Licensee disagrees with the Province’s determination of similarcircumstances or similar treatment, the Project Owner or Licensee, as the case may be, may submit thedisagreement to arbitration by notice to the Province. Each of the Project Owners and Licensees agrees that,for the purposes of any such arbitration and notwithstanding clause 26.14, the Province may disclose to thearbitrators and to each Project Owner and Licensee who is a party to the arbitration any information receivedfrom any Project Owner or Licensee that is relevant to the Province’s position with respect to the determinationof similar circumstances or similar treatment pursuant to the arbitration.
Notwithstanding the foregoing or any other provision of this Agreement, the Province and Nalcor Oilmay enter into an agreement in relation to Nalcor Oil’s liability to make payments to the Province under thisAgreement. If such an agreement is entered into, no other Project Owner or Licensee shall be liable to theProvince for any portion of the Royalty Share which, absent such agreement, would have been payable byNalcor Oil under this Agreement.
6.3 Independent Interpretation
It is the intention and agreement of all Parties hereto that, with the exception of references to theAllocation Agreement, this Agreement is to be interpreted and enforced without reference to the provisions ofany other agreement or document with respect to a Resource Project made by, between or among any one ormore of the Parties hereto, Canada and others except as otherwise expressly provided for or otherwisereferenced herein.
ARTICLE VII: EFFECTIVE TIME AND TERM
7.1. Effective Time
This Agreement shall become effective upon completion of the closing provided for inEscrow and Closing Agreement.
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7.2 Term
This Agreement shall remain in force in respect of a Project Owner until the first to occur of ProjectTermination in respect of that Project Owner, termination by the Province pursuant to the provisions of clause25.8 in respect of that Project Owner or Project Withdrawal by that Project Owner and, in each case, thereafteruntil all accounts between that Project Owner and the Province with respect to this Agreement have beenfinally settled. The provision by the Province of notice of termination pursuant to clause 25.8 shall not in anymanner preclude a Project Owner from disputing the validity of any such notice nor the affect of such noticewith respect to ending the term of this Agreement.
7.3 LimitatIon of Project Withdrawal
Notwithstanding the provisions of clause 7.2, Project Withdrawal shall not terminate this Agreement ifa Project Owner or Project Owners, Canada, another Person or any combination thereof has become theSuccessor to the Working Interest in a Resource Project of a Project Owner prior to termination of thisAgreement by reason of Project Termination or pursuant to the provisions of clause 25.8.
7.4 Continuation of Agreement
In the event that this Agreement is terminated with respect to a Project Owner, this Agreement shallcontinue in effect with respect to all other Project Owners.
PART II: PARTICIPANTS AND ARRANGEMENTS
ARTICLE VIII: PARTNERSHIPS
8.1 Liability of Partners
Each of the general partners of a Party hereto which is a partnership shall be fully liable to the Provincefor all of the liabilities of the partnership to the Province under this Agreement.
8.2 Change in Partnerships
A change in the nature of the partnership or in the partners, partnership interests or the liability of anyof the partners of Chevron Partnership, ExxonMobil Partnership or Petro-Canada Partnership shall not beeffective so as to either release or diminish the liability at that time to the Province hereunder of thatpartnership or any Licensee unless the Province agrees thereto in writing.
8.3 Notice of Change of Partners
Contemporaneously with the execution of this Agreement each of Exxon Mobil Partnership, ChevronPartnership and Petro-Canada Partnership have delivered to the Province notarially certified copies of alldocuments constituting its partnership and, within ninety (90) days of any amendment to or supplement ofsuch partnership documents, the Project Owner affected thereby shall deliver to the Province a notariallycertified copy of the agreement or document making the amendment or supplement.
8.4 Successor Partnerships
In the event that there is a change iii the partners of, or any other change relative to, ExxonMobilPartnership, Chevron Partnership or Petro-Canada Partnership which would at law result in the tmination orreconstitution of any such partnership, then:
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(i) the successor partnership shall be bound by the provisions of this Agreement and shall have all of therights and obligations under this Agreement of its predecessor partnership; and
(ii) each of ExxonMobil, Chevron and Suncor agrees that it shall not be released from its liabilities andobligations under this Agreement with respect to the predecessor partnership and, further, agrees thatit shall be as liable and have the same obligations under this Agreement with respect to its successorpartnership as it has under this Agreement with respect to its predecessor partnership.
ARTICLE IX: LICENSEES
9.1 ExxonMobil Liability for ExxonMobil Partnership
ExJ(onMobil is a general partner in the ExxonMobil Partnership. Notwithstanding any other provisionhereof or that ExxonMobil may cease to be a general partner in the ExxonMobil Partnership, ExxonMobil shallbe fully and absolutely liable to the Province for all obligations of the ExxonMobil Partnership to the Provinceunder this Agreement until the Province may agree otherwise.
9.2 No Reduction of ExxonMobil Liability
ExxonMobil and ExxonMobil Partnership hereby advise the Province, and the Province acknowledgesadvice from ExxonMobil and ExxonMobil Partnership, that ExxonMobil Partnership is the full legal, beneficialand, to the fullest extent possible, registered owner of each of (a) the Working lnterest-PLIOO5 and (b) theWorking lnterest-EL1093 in the Resource Project attributed to it in clause 16.1 and all assets or interest inrelation thereto and otherwise attributable to the interest of ExxonMobil in the Licences. ExxonMobil,Exxon Mobil Partnership and the Province acknowledge that, as a result of the requirements of the FederalAccord Act, ExxonMobil must be the Person named in the PLIOO5 and in the future significant discoverylicence or production licence issued in substitution for EL1093 but ExxonMobil holds all such interests for andon behalf of the ExxonMobil Partnership. The Province may grant time, renewals, extensions, indulgences,releases, discharges and otherwise deal with ExxonMobil Partnership without in any way limiting or lesseningthe liability of ExxonMobil under this Agreement except to the extent that it results in any reduction of theliability of ExxonMobil Partnership and, thus, ExxonMobil. The Province shall not be bound to exhaust itsrecourse against ExxonMobil Partnership before being entitled to payment hereunder from ExxonMobil. Theobligations of ExxonMobil under this Agreement shall not be terminated, limited or lessened by the terminationof the existence of ExxonMobil Partnership. ExxonMobil shall be bound by each account settled betweenExxonMobil Partnership and the Province.
9.3 Chevron Liability for Chevron Partnership
Chevron is a general partner in the Chevron Partnership. Notwithstanding any other provision hereof orthat Chevron may cease to be a general partner in the Chevron Partnership, Chevron shall be fully andabsolutely liable to the Province for all obligations of the Chevron Partnership to the Province under thisAgreement until the Province may agree otherwise.
9.4 No Reduction of Chevron Liability
Chevron and Chevron Partnership hereby advise the Province, and the Province acknowledges advicefrom Chevron and Chevron Partnership, that Chevron Partnership is the full legal, beneficial and, to the fullestextent possible, registered owner of each of (a) the Working lnterest-PL1005 and (b) the Working InterestEL1093 in the Resource Project attributed to it in clause 16.1 and all assets or interest in relation thereto andotherwise attributable to the interest of Chevron in the Licences. Chevron, Chevron Partnership and theProvince acknowledge that, as a result of the requirements of the Federal Accord Act, Chevron must be the r
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Person named in the Licences but Chevron holds all such interests for and on behalf of the ChevronPartnership. The Province may grant time, renewals, extensions, indulgences, releases, discharges andotherwise deal with Chevron Partnership without in any way limiting or lessening the liability of Chevron underthis Agreement except to the extent that it results in any reduction of the liability of Chevron Partnership and,thus, Chevron. The Province shall not be bound to exhaust its recourse against Chevron Partnership beforebeing entitled to payment hereunder from Chevron. The obligations of Chevron under this Agreement shall notbe terminated, limited or lessened by the termination of the existence of Chevron Partnership. Chevron shall bebound by each account settled between Chevron Partnership and the Province.
9.5 Suncor Liability for Petro-Canada Partnership
Suncor is a general partner in the Petro-Cariada Partnership. Notwithstanding any other provisionhereof or that Suncor may cease to be a general partner in the Petro-Cariada Partnership, Suncor shall be fullyand absolutely liable to the Province for all obligations of the Petro-Canada Partnership to the Province underthis Agreement until the Province may agree otherwise.
9.6 No Reduction of Suncor Liability
Suncor and Petro-Canada Partnership hereby advise the Province, and the Province acknowledgesadvice from Suncor and Petro-Canada Partnership, that Petro-Canada Partnership is the full legal, beneficialand, to the fullest extent possible, registered owner of each of (a) the Working lnterest-PLIOO5 and (b) theWorking lnterest-EL1093 in the Resource Project attributed to it in clause 16.1 and all assets or interest inrelation thereto and otherwise attributable to the interest of Suncor in the Licences. Suncor, Petro-CanadaPartnership and the Province acknowledge that, as a result of the requirements of the Federal Accord Act,Suncor must be the Person named in the Licences but Suncor holds all such interests for and on behalf of thePetro-Canada Partnership. The Province may grant time, renewals, extensions, indulgences, releases,discharges and otherwise deal with Petro-Canada Partnership without in any way limiting or lessening theliability of Suncor under this Agreement except to the extent that it results in any reduction of the liability ofPetro-Canada Partnership and, thus, Suncor. The Province shall not be bound to exhaust its recourse againstPetro-Canada Partnership before being entitled to payment hereunder from Suncor. The obligations of Suncorunder this Agreement shall not be terminated, limited or lessened by the termination of the existence of PetroCanada Partnership. Suncor shall be bound by each account settled between Petro-Canada Partnership andthe Province.
ARTICLE X: OPERATORS
10.1 Activities of Operators
(I) EL1093
The EL1093 Project Owners shall cause the Resource Project Operator-EL1093 to have and maintainan office in Newfoundland and Labrador, which office shall have appropriate levels of staffing anddecision making.
(ii) PLIOO5
The PLIOO5 Project Owners shall cause the Resource Project Operator-PL1005 to have and maintainan office in Newfoundland and Labrador, which office shall have appropriate levels of staffing anddecision making.
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10.3 Change of Operators
(I) EL1093
The EL1093 Project Owners shall give the Province thirty (30) days advance notice of the effective dateof the resignation or replacement of the Resource Project Operator-EL1093 and such informationrelative to the new Resource Project Operator-EL1093 as the EL1093 Project Owners consider theProvince should require and such other information with respect to the resignation or replacement asthe Province may reasonably request.
(ii) PLIOO5
The PLIOO5 Project Owners shall give the Province thirty (30) days advance notice of the effective dateof the resignation or replacement of the Resource Project Operator-PLIOO5 and such informationrelative to the new Resource Project Operator-PLIOO5 as the PLIOO5 Project Owners consider theProvince should require and such other information with respect to the resignation or replacement asthe Province may reasonably request.
10.4 Compliance with Agreement by Resource Project Operators
Upon a Person being appointed a Resource Project Operator, the applicable Project Owners shall causesuch Person to execute and deliver to the Province: (a) an Operator’s Agreement, in the event that such Personhas been granted a Security Interest in the Production Licence or the Charged Premises of a Project Owner; or(b) an Operator’s Acknowledgement Agreement, in the event such Person has not been granted such aSecurity Interest, and the Province shall execute and deliver to the other parties thereto such agreement. Theapplicable Project Owners shall cause each Person being a Resource Project Operator to comply with theprovisions of the Operator’s Agreement or Operator’s Acknowledgement Agreement to which the ResourceProject Operator is a party.
ARTICLE XI: RIGHTS AND OBLIGATIONS OF PROJECT OWNERS AND LICENSEES
11,1 Project Owners
To the extent that this Agreement imposes a separate liability upon a Project Owner to perform a dutyor obligation, or creates a separate right, under or pursuant to this Agreement, then only that Project Owner,and rio other Project Owner, shall be liable for the performance of such duty or obligation, or entitled to suchright. To the extent that this Agreement imposes a collective liability upon more than one Project Owner toperform a duty or obligation under or pursuant to this Agreement, then each Project Owner upon whom suchduty or obligation is imposed shall be liable for the performance of such duty or obligation but no ProjectOwner shall be liable for the non-performance by any other Project Owner of such collective obligation. Subjectto the foregoing, nothing in this Agreement or, to the extent variable by agreement, any applicable laws shallcreate, or be construed as creating, any joint, joint and several or collective rights or obligations on the part ofthe Project Owners.
11.2 Licensees
To the extent that this Agreement imposes a separate liability upon a Licensee to perform a duty orobligation, or creates a separate right, under or pursuant to this Agreement, then only that Licensee, and noother Licensee, shall be liable for the performance of such duty or obligation, or entitled to such right. Subjectto the foregoing, nothing in this Agreement or, to the extent variable by agreement, any applicable laws shallcreate, or be construed as creating, any joint, joint and several or collective rights or obligations on the part of aLicensee except in respect of the Project Owner of which the Licensee is a partner and any successorpartnership as provided for in clause 8.4.
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ARTICLE XII: REPRESENTATIONS
12.1 PartnershIps
Each of ExxonMobil Partnership, Chevron Partnership and Petro-Canada Partnership hereby severallycovenants, represents and warrants with and to the Province as to itself only, and each of ExxonMobil, Chevronand Suncor hereby severally covenants, represents and warrants with and to the Province with respect to onlythe Project Owner of which it is a partner, that:
(i) It is a general partnership constituted and existing under the laws of the Province of Alberta and it isqualified to carry on business in Newfoundland and Labrador and the Offshore Area;
(ii) Each of its partners has the requisite power, authority and qualification to be a partner in thepartnership; and
(iii) It, and each of its partners, have all requisite power and authority to enter into this Agreement and toperform its obligations under this Agreement and it has duly executed and delivered this Agreement.
12.2 Corporations
Each of ExxonMobil, ExxonMobil Hibernia, Chevron, Suncor, Murphy Oil, CHHC, Statoil and Nalcor Oilhereby severally covenants, represents and warrants with and to the Province as to itself only that:
(i) It is a corporation in good standing under the laws of its jurisdiction of incorporation and is qualified tocarry on business in Newfoundland and Labrador and the Offshore Area; and
(ii) It has all requisite power and authority to enter into this Agreement and to perform its obligationsunder this Agreement and has duly executed and delivered this Agreement.
12.3 Province
The Province hereby covenants, represents and warrants with and to each of the other Parties heretothat:
(I) it has all requisite power and authority to enter into this Agreement and, subject to the generalrequirement to obtain appropriations, to perform its obligations in accordance with the terms of thisAgreement and it has duly executed and delivered this Agreement.
ARTICLE XIII: SECURITY
13.1 Security
As security for the due payment of the Royalty Share payable by a Project Owner to the Province at thetimes and in the manner specified in this Agreement, such Project Owner does hereby grant, convey, assign,mortgage, charge, pledge and hypothecate to and in favour of the Province, as and by way of a first, fixed andspecific mortgage, charge, pledge, hypothec and security interest, such Project Owner’s entire right, title, estateand interest, whether now owned or hereafter acquired by it in any manner, in, to, under, or in respect of, andall benefit and advantage accruing to such Project Owner from:
(i) such Project Owner’s share (undivided and divided) of all Hibernia Crude EL1093/PL1005; and
(ii) all monies and proceeds which may at any time and from time to time be due, owing or payable tosuch Project Owner after the date of this Agreement from or in respect of (a) such Project Owner’sshare (undivided and divided) of all Hibernia Crude EL1093/PLIOO5 and of any agreements now ineffect or hereafter entered into by such Project Owner relating to the sale, use or other disposition ofsuch Project Owner’s share (undivided and divided) of all Hibernia Crude EL1093/PLIOO5 and (b) the
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sale, assignment (other than by way of security only), transfer or other disposition, in whole or in part,of the Working Interest of such Project Owner in the Licences, or either of them.
The first, fixed and specific mortgage, charge, pledge, hypothec and security interest created or intended to becreated herein by the Grantors (as defined in clause 13.4) to and in favour of the Province is herein referred toas the “Security”. The property, assets, rights and things which are or are intended to be subject to the Securityare herein referred to as the “Charged Premises”.
In connection with the Security created by each Project Owner, the Licensee which is a partner of eachsuch Project Owner hereby represents and warrants to the Province that:
(a) it is a general partner of such Project Owner;
(b) it has no beneficial interest in any of the Charged Premises, except to the extent that it mayhave such a beneficial interest in its capacity as a general partner of such Project Owner; and
(c) all interest of the Licensee in a Licence which is held by it in its capacity as a holder of aLicence is held for and on behalf of such Project Owner.
The Licensee hereby acknowledges that the Province is relying on the foregoing representation and warranty.The Licensee hereby further acknowledges the Security created by the Project Owner and agrees to execute, onbehalf of the Project Owner such instruments in registrable form as may be necessary to assure to the Provincea valid first and specific charge on the Charged Premises.
Notwithstanding anything contained in this Article, the Province acknowledges and agrees that theSecurity shall include, in respect of the Licences, only the proceeds of disposition of all or a part of the WorkingInterest therein but shall not include any charge upon or interest in the Licences themselves nor any of therights created therein. In addition the Security shall not include any interest in any proceeds resulting from agrant of a Security Interest for the purpose of securing any indebtedness or liability of a Project Owner orLicensee.
13.2 Security Valid Upon Execution
Without in any way limiting the provisions of clause 13.1, the Security shall become effective as at thetime of execution and delivery of this Agreement and shall constitute a continuing Security until released anddischarged by written instrument executed by the Province, for the due payment of the Royalty Share fromtime to time payable under this Agreement, notwithstanding that an amount may not be owing at the time ofsuch execution and delivery or from time to time thereafter.
13.3 Enforcement
In the event that a Project Owner makes default in the payment, when due, of any Royalty Sharepayable by such Project Owner to the Province under this Agreement, and such default is not cured within 5days of notice thereof by the Province to such Project Owner, the Security created in this Article by such ProjectOwner and the Licensee, if any, which is a partner of such Project Owner shall immediately becomeenforceable.
13.4 Remedies on Default
Whenever the Security created in this Article by a Project Owner or Licensee, if any, which is a partnerof such Project Owner (collectively the “Grantors” and individually a “Grantor”) on any of the Charged Premisesshall become enforceable, the Province may realize upon any of such Charged Premises and enforce its rightsby:
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(a) taking possession of all or any part of such Charged Premises and collecting and getting in any moniesand proceeds therefrom or in respect thereof;
(b) sale of such Grantor’s share of Hibernia Crude EL1093/PLIOO5 (undivided and divided) in accordancewith clause 13.5
(c) proceedings in any court of competent jurisdiction for the appointment of a receiver (which term asused in this Article includes a receiver and manager) of any or all of such Charged Premises;
(d) proceedings in any court of competent jurisdiction for the sale of any or all of such Grantor’s share(undivided and divided) of Hibernia Crude EL1093/PL1005;
(e) filing of proofs of claim and other documents to establish its claims in any proceeding relative to suchGrantor; and
(f) any other remedy or proceeding authorized or permitted hereby or by law or in equity.
The foregoing remedies may be exercised from time to time separately or in any combination and are inaddition to and not in substitution for any other rights of the Province howsoever created; provided, however,the Province shall not be entitled to remove or take possession pursuant to the Security of any Hibernia CrudeEL1093/PLIOO5 prior to the Transfer Point nor shall it, pursuant to the Security, dispose of any such rights toany third party except subject to the same restriction.
13.5 Sale by the Province
If the Security created by a Grantor on any of the Charged Premises shall become enforceable, theProvince may, either before or after any entry, sell and dispose of such Grantor’s share of all Hibernia CrudeEL1093/PLIOO5, either as a whole or in separate parts, at public auction or by tender or by private sale atsuch time or times as the Province may determine, and may make any such sale, either for cash or credit orpart cash and part credit, and with or without advertisement, and with or without a reserve bid as the Provincemay see fit. The Province may, with the consent of the parties to any such contract of sale, rescind or vary anysuch contract of sale that may have been entered into by the Province and resell with or under any of thepowers conferred hereunder and adjourn any such sale from time to time and may execute and deliver to thepurchaser or purchasers of such Grantor’s share of Hibernia Crude EL1093/PLIOO5 or any part thereof a goodand sufficient deed or deeds for the same. Notwithstanding the foregoing, the Province shall not be entitled tosell or dispose of any of the Grantor’s share of Hibernia Crude EL1093/PLIOOS under the provisions of anysales agreement entered into by such Grantor relating thereto but this restriction shall not prohibit the Provincefrom selling any of such Grantor’s share of Hibernia Crude EL1093/PL1005 to the purchaser under such salesagreement by separate agreement.
13.6 Powers of the Receiver
Whenever the Security created by a Grantor on any of the Charged Premises shall become enforceable,the Province may apply to a court of competent jurisdiction for the appointment of a receiver of any of theCharged Premises with power to:
(i) take possession of, collect and get in any or all of such Charged Premises and, for that purpose, to takeproceedings in the name of the Grantor which created the Security on such Charged Premises orotherwise; and
(ii) sell or concur in selling any or all parts of such Grantor’s share (undivided and divided) of HiberniaCrude EL1093/PLIOO5 without notice and in such manner as may seem advisable to the receiver, andto effect such sale by conveying in the name and on behalf of such Grantor or otherwise, provided,however, that such sale may not be made under the provisions of any sale agreement ent,red into by jthe Grantor relatingthereto; (7
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and with such other discretions, rights and powers as the court making such appointment shall conferprovided, however, the Province shall not be entitled to remove or take possession pursuant to the Security ofany Hibernia Crude EL1093/PLIOO5 prior to the Transfer Point nor shall it, pursuant to theSecurity, dispose ofany such rights to any third party except subject to the same restriction. All money from time to time receivedby the receiver from or in respect of any of such Charged Premises may be applied as follows: first, indischarge of all operating expenses affecting such Charged Premises; second, in keeping in good standing anySecurity Interests on such Charged Premises having priority over the Security created by such Grantor; third, inpayment of the reasonable remuneration and disbursements of the receiver; fourth, in payment to the Provinceof the monies payable hereunder; and the balance, if any, shall be paid to the Grantor which created theSecurity on such Charged Premises.
13.7 Expenses
Each Project Owner agrees, without prejudice to its right at any time to contest or dispute thereasonableness of same, to pay to the Province forthwith on demand all reasonable costs, charges andexpenses, including all reasonable legal fees (on a solicitor and his own client basis), incurred by the Provincein connection with the recovery or enforcement of payment of any amount payable by such Project Ownerhereunder in respect of the Royalty Share, whether by realization or otherwise. All such sums shall be securedby the Security created by such Project Owner and the Licensee, if any, which is a partner of such ProjectOwner, shall be added to the money secured thereby and shall bear interest at the rate provided for in clause25.1.
13.8 Representation of Grantors
Each of the Grantors severally represents and warrants, as to itself only, that it has not in any mannercreated, or agreed to create, any Security Interest in, upon or with respect to its Working Interest in theLicerices or its interest in the Charged Premises, except as:
(i) provided for, or contemplated to be created
(A) herein, or
(B) in the Operating Agreements, or
(ii) not restricted herein,
and that such Working Interest and Charged Premises are free and clear of all other encumbrances created by,through or under it.
13.9 Reporting and Notices
Upon default by a Project Owner in the due payment of any Royalty Share payable by it, such ProjectOwner shall forthwith and thereafter for so long as such default is continuing provide to the Province particularsof all agreements entered into by such Project Owner for the sale of Hibernia Crude EL1093/PLIOO5. TheProvince covenants and agrees with each Project Owner that it will not give notice requiring a payor of anymonies under an agreement entered into by such Project Owner for the sale, use or other disposition ofHibernia Crude EL1093/PLIOO5 to paysuch monies to the Province unless and until a default has occurred inthe due payment of any Royalty Share payable by such Project Owner.
13.10 Further Assurances
Each Grantor, as to itself only, severally covenants that it shall forthwith, and from time to time,execute or cause to be executed all deeds and documents and do or cause to be done all thingsj-hich are
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necessary to grant to the Province (so far as may be required under the local laws of the places where theCharged Premises are, from time to time, situated) a valid and continuing first, fixed and specific mortgage,pledge, charge and hypothec of the nature herein specified upon the property, assets, rights and things,whether now owned or hereafter acquired, intended to be included within the Charged Premises, to securepayment of the monies intended to be secured by this Agreement, and for conferring upon the Province thepower of sale and other powers over the Charged Premises as are hereby expressed to be conferred, including,without limitation, delivering to the Province from time to time at its request specific assignments of themonies and proceeds which may at any time be due or owing to such Grantor from or in respect of the salesagreements for Hibernia Crude EL1093/PLIOO5 then in effect in such form as the Province may reasonablyrequest.
Notwithstanding the foregoing, the Project Owners shall not be obliged to execute any powers ofattorney pursuant to the foregoing. The Province covenants and agrees with each Grantor that it will not givenotice of such specific assignments or the Security Interest created thereby to the payor of any monies underany agreement made subject thereto and entered into by such Grantor unless and until a default has occurredin the due payment of any Royalty Share payable by it or by the Project Owner of which it is a partner, as thecase may be.
13.11 Power of Attorney
Each Grantor creating Security on any of the Charged Premises hereby irrevocably appoints theProvince as its attorney with power of substitution from time to time for and in the name of such Grantor, afterthe Province has become entitled to exercise the remedies referred to in clause 13.4, to complete, sign andseal all documents and transfers necessary in order to complete the transfer of any and all of such ChargedPremises to the Province. The power of attorney herein granted shall not be revoked by the dissolution,liquidation or other termination of the existence of such Grantor or for any other reason.
13.12 Trust ProvIsion
If a Grantor shall have failed to pay when due its Royalty Share, then and for so long as such default iscontinuing all monies and proceeds collected or received by a Grantor in respect of the sale, assignment,transfer or other disposition, in whole or in part, of the Working Interest of such Grantor in the Licences oreither of them shall, to the extent of the amount of any Royalty Share owing to the Province by such Grantor orthe Project Owner of which the Grantor is a partner at such time, be received as trustee for the Province and, tothe extent of a fly amount reasonably required to be allocated to the Licences pursuant to clause 16.5, shall beforthwith paid over to the Province. The foregoing trust obligations shall extend only to Royalty Share due andpayable and estimated by the Province to be payable by such Grantor to the Province based upon filingsrequired prior to such date and specifically shall include any Royalty Share which may thereafter bedetermined to have been due at such date based upon any redetermination, recalculation, annualreconciliation or arbitration hereunder.
13.13 Acknowledgement of Termination of Security
Notwithstanding anything to the contrary herein, the Security herein created in respect of any HiberniaCrude ELIO93/PLIOO5 shall (provided the Project Owner creating the Security is not in default in the paymentof any Royalty Share due and payable to the Province and the Province is enforcing its security with respect tosuch Hiberrila Crude EL1093/PLIOO5) cease to apply to such Hiberrila Crude EL1093/PLIOO5 once suchHibernia Crude EL1093/PLIOO5 reaches the later of (i) the Sale Point; and (ii) the Transfer Point.
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13.14 Use by Province of Shuttle Tankers and Temporary Replacement Tankers to Effect Security
In the event that the Province is enforcing its Security as provided for in this Article 13 with respect to aProject Owner in default in payment of its Royalty Share, the Province may give notice in writing to the ProjectOwners that it wishes to be advised as to the next lifting scheduled for that defaulting Project Owner pursuantto the Project Owners’ Lifting Agreement. The Project Owners will advise the Province of the date the nextlifting is scheduled in respect of that Project Owner and shall make available to the Province as soon as isreasonably possible the use of a Shuttle Tanker or a Temporary Replacement Tanker provided such defaultingProject Owner had arranged the use of such tanker for such lifting. If there is not then available and thedefaulting Project Owner had not arranged or was not entitled to the use of such tanker, then the Province shallarrange its own transportation or, if the Province so requests, the remaining Project Owners will cooperate andcoordinate with the Province the use of such tanker for the subsequently scheduled lifting of the defaultingProject Owner. In the event that the Project Owners are required to provide the use of a Shuttle Tanker or aTemporary Replacement Tanker, they shall utilize their capacity to tranship such Crude Oil through theWhiffen Head Transshipment Terminal. The use of such tanker and the Whiffen Head Transshipment Terminalby the Province in these circumstances will be in accordance with the terms of ARTICLE XXII of this Agreement.In addition, the Province acknowledges and agrees that in the event the other Project Owners assist andcooperate with the Province in the use of such tanker and the Whiffen Head Transshipment Terminal as aresult of any such request by the Province, the Province will indemnify and save such Project Owners harmlessof and from any reasonable liabilities, costs or expenses resulting from the use by the Province of such tankerand the Whiffen Head Transshipment Terminal incurred by them in doing so, provided, however, the costs foruse of such tanker and the Whiffen Head Transshipment Terminal shall be in accordance with ARTICLE XXII.
ARTICLE XIV: PROJECT OWNERS’ AGREEMENTS
14.1 Operating Agreements
Contemporaneously with the execution of this Agreement by the Province, the Project Owners havedelivered to the Province originally executed copies or notarially certified copies of the entire OperatingAgreements to which they are parties on the date hereof. The Project Owners shall deliver to the Provinceoriginally executed copies or notarially certified copies of all agreements and other documents which amend,replace or alter howsoever the provisions of such Operating Agreements or the rights or obligations under suchagreements of the Persons bound or affected thereby. This clause shall not require the Project Owners todeliver to the Province any agreements or documents which are contemplated by, which implement, which giveeffect to or which allow for or reflect the occurrence or performance of matters provided for in such OperatingAgreements and which do not amend, replace or alter the provisions of such Operating Agreements.
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14.2 Project Owners’ Lifting Agreement
Prior to the date of this Agreement, the Project Owners shall deliver to the Province originally executedcopies or notarially certified copies of the Project Owners’ Lifting Agreement, and thereafter all agreementsand other documents which amend, replace or alter howsoever the provisions of the Project Owners’ LiftingAgreement or the rights or obligations under such agreement of the Persons bound or affected thereby. Thisclause shall not require the Project Owners to deliver to the Province any agreements or documents which arecontemplated by, which implement, which give effect to or which allow for or reflect the occurrence orperformance of matters provided for in the Project Owners’ Lifting Agreement, and which do not amend,replace or alter the provisions of the Project Owners’ Lifting Agreement. Subject to clause 14.3, noamendment, replacement or other alteration whatsoever of the provisions of the Project Owners’ LiftingAgreement or the rights or obligations under such agreement of the Persons bound or affected by the ProjectOwners’ Lifting Agreement shall be effective for the purposes of this Agreement to the extent only that thesame would adversely affect any calculation to be made pursuant to this Agreement until the Provinceconsents thereto in writing.
14.3 ProvincIal Approval
In the event that, upon receipt by the Province of an originally executed or notarially certified copy of anamendment, replacement or other alteration of the provisions of the Project Owners’ Lifting Agreement or therights or obligations under such agreement of the Persons bound or affected thereby, the Province disagreeswith the provisions thereof which would adversely affect any calculation to be made pursuant to thisAgreement, then the Province shall give the Project Owners notice of those provisions with which the Provincedisagrees. If, after discussions between the Project Owners and the Province, the Project Owners and theProvince cannot resolve any such disagreement as aforesaid, either the Project Owners or the Province maysubmit such disagreement to arbitration to determine, initially, whether the provisions of the Project Owner’sLifting Agreement would adversely affect any calculation to be made pursuant to this Agreement and, if it isdetermined that there is such an adverse effect, then to determine with respect to the provisions in disputewhat the Project Owners’ LiftIng Agreement should provide for the purposes only of this Agreement.
ARTICLE XV: JOINT ACCOUNT
15.1 Joint Account
No amendment, replacement or other alteration whatsoever of the provisions of the EL1093 JOA or thePLIOO5 JOA as set out in Schedule H of this Agreement which relate to the Joint Account shall be effective forthe purposes of this Agreement until the Province consents thereto in writing, such consent not to beunreasonably withheld.
15.2 Replacement of Joint Account
The Project Owners acknowledge that the existence of the Joint Accounts and the standards,procedures, rules and review provided for with respect thereto provide safeguards essential to the Province foradministration of the royalties to be paid to the Province pursuant to this Agreement. Further, the ProjectOwners acknowledge that were all of the Working Interests in a Licence to be held by one Project Owner or oneother Person only (for purposes of this clause a “Single Owner Licence”), that the safeguards provided to theProvince by the Joint Account applicable to such Licence would be eliminated. In the event that all WorkingInterests in a Licence are transferred or otherwise conveyed howsoever to one Project Owner or one Person,then, until the Province and the Project Owner or Person who owns all of the Working Interests in such Licencehave agreed, either by discussion or by arbitration, to provisions to replace such Joint Account, this Agreementshall be amended by substituting for the words contained in clauses 29.1(i)(c) and 29.1(ii)(c) the words: “it is ,jthe lesserof the actual cost orfair market value; and”. Either the Province or the Project Owner Person who ‘-“
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owns all of the Working Interests in a Single Owner Licence may by notice to the other initiate discussionsrelative to provisions to replace the Joint Account applicable thereto and, in the event that such discussions areunsuccessful, either the Province or such Project Owner or Person may submit to arbitration the determinationof the provisions which will replace items (i)(c) and (ii)(c) of clause 29.1 and the definition of Joint Account andother provisions of this Agreement affected thereby and this Agreement shall be amended as decided by sucharbitration or as otherwise agreed by the Province and such Project Owner or Person. For the purposes of thisclause a Project Owner and all Affiliates of the Project Owner shall be regarded as one Project Owner and aPerson and all Affiliates of that Person shall be regarded as one Person.
15.3 Compliance by Operators
(I) EL1093
The EL1093 Project Owners shall, and shall cause the Resource Project Operator-EL1093 to, abide byand fully perform the provisions of the EL1093 JOA relative to the Joint Account-EL1093.
(ii) P11005
The PLIOO5 Project Owners shall, and shall cause the Resource Project Operator- PLIOO5 to, abide byand fully perform the provisions of the PLIOO5 JOA relative to the Joint Account- PLIOO5.
ARTICLE XVI: PRESENT INTERESTS AND SUCCESSORS
16.1 working Interests in the Resource Projects
The Working Interests in the Resource Projects on the date of this Agreement are:
(A) EL1093:
ExxonMobil Partnership 25.3125%
Chevron Partnership 24.1875%
Petro-Canada Partnership 18%
Nalcor Oil 10%
CHHC 7.65%
Murphy Oil 5.85%
ExxonMobil Hibernia 4.5%
Statoil 4.5%
(B) PLIOO5
ExxonMobil Partnership 22.5%
Chevron Partnership 22.5%
Petro-Canada Partnership 22.5%
Statoil 22.5%
Nalcor Oil 10%
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16.2 Consistent Working Interests
(I) EL1093
An EL1093 Project Owner shall not have a Working Interest in EL1093 which is different from theWorking Interest of such Project Owner in the Resource Project-EL1093.
(ii) PLIOO5
A PLIOO5 Project Owner shall not have a Working Interest in PLIOO5 which is different from theWorking Interest of that such Project Owner in the Resource Project-P11005.
16.3 Restrictions on Dispositions and Novations
(a) Each Project Owner, as to itself only, severally covenants with the Province that if and for so long as anyportion of the Royalty Share then due and payable by such Project Owner to the Province pursuant tothis Agreement remains unpaid, it shall not sell, assign, transfer or otherwise dispose of, in whole or inpart, its interest in the Licences.
(b) Each Licensee, as to itself only, severally covenants with the Province that if and for so long as anyportion of the Royalty Share then due and payable by the Project Owner of which it is a partner remainsunpaid, such Licensee shall not sell, assign, transfer or otherwise dispose of, in whole or in part, itsinterest in the Licences.
(c) Each Project Owner, as to itself only, severally covenants with the Province that if and for so long as anyportion of the Royalty Share then due and payable by any Project Owner to the Province pursuant tothis Agreement remains unpaid, it shall not permit any Person to become a party to the OperatingAgreements as a Successor to all or any part of the Working Interest of such Project Owner.
16.4 Notice of Dispositions
If and for so long as any portion of the Royalty Share then due and payable by a Project Owner remainsunpaid, such Project Owner and the Licensee which is a partner of such Project Owner shall, with respect to anyproposed sale, assignment, transfer or other dispositIon of any of its interest in the Licences, give to theProvince written notice of:
(i) the nature and size of the interest being disposed of;
(ii) the effective date of such disposition;
(iii) the allocation of the purchase consideration agreed upon between such Project Owner and the Personacquiring such interest with respect to the Licences or the Hibernia Crude EL1093/PLIOO5 yet to beproduced;
(iv) the amount of monies or nature of the proceeds to be received for such interest; and
(v) the name and address of the Person acquiring such interest.
The information contained in any such notice of disposition shall be confidential information for the purposesof clause 26.14 and may only be disclosed for the purposes of items (a) or (f) thereof or for the purposes ofenforcing any Security Interest granted to the Province pursuant to this Agreement.
16.5 Licence Allocation
If and for so long as any portion of the Royalty Share then due and payable by a Project Owner remainsunpaid, such Project Owner, as to itself only, severally covenants with the Province that, with respect to anysale, assignment, transfer or other disposition of any of its interest in the Licences which alscL.jncludes a
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disposition of other assets of the Resource Projects, it shall allocate from the actual price paid for all suchassets a reasonable amount to the interest of such Project Owner in the Licences or the Hibernia CrudeEL1093/PLIOO5 yet to be produced but which in no event shall be required to exceed the Royalty Share thendue and payable. The Province may at any time submit any disagreement that the Province has with any suchallocation to arbitration and any amount determined by the arbitrators to be the reasonable allocation shall bethe allocation for all purposes of this Agreement. For the purposes of any such arbitration, the allocation shallbe made on the basis of that proportion of such sale consideration for all such assets which is in the sameproportion as the estimated value, at that time, of the interest of the Project Owner in Hibernia CrudeEL1093/PL1005 yet to be produced is to the value of all assets of the Resource Projects included within thedisposition. Notwithstanding the foregoing, the Province shall have no right to claim from the purchaser anamount greater than the purchase consideration actually allocated in the purchase agreement to the Licencesor Hibernia Crude EL1093/PLIOO5 yet to be produced, or to enjoin, delay or otherwise interfere in any mannerwith any sale, assignment, transfer or other disposition by a Project Owner or Licensee of its interest in theLicences and whether or not in combination with any other assets of the Resource Projects, on the basis of thisclause 16.5.
16.6 Further Restriction on Dispositions
Each Project Owner and each Licensee, in each case as to itself only, severally covenants with the Province thatit shall not (except pursuant to the grant of Security Interests, as contemplated under, and in accordance with,the provisions of clause 16.8) sell or assign in whole or in part, any monies or proceeds which may at any timebe due or owing to it from or in respect of (a) its share, if any, of Hibernia Crude EL1093/PLIOO5 or anyagreements relating to the sale, use or other disposition thereof or (b) the sale, assignment, transfer or otherdisposition, in whole or in part, of its interest in the Licences or either of them.
16.7 Notice of Disposition and Novation
Forthwith upon a Project Owner or the Licensee which is a partner of such Project Owner no longerbeing entitled, beneficially or of record, and whether by sale, assignment, transfer or other disposition (exceptby virtue of realization by a holder of a Security Interest), to any Working Interest in the Resource Projects orthe Licences to which such Project Owner or Licensee was previously entitled, such Project Owner or Licensee,as the case may be, shall give to the Province written notice of the nature and size of the Working Interest inthe Resource Projects or the Licences to which it is no longer entitled, the effective date of the transfer of suchinterest and the name and address of the transferee. Until such transferee delivers to the Province a NovationAgreement with respect to such Working Interest to which such Project Owner or Licensee is no longer entitledexecuted by such transferee as the defined Assignee thereunder and all other Parties thereto except theProvince and the Royalty Share then due and payable by such Project Owner or Licensee has been paid, suchProject Owner or Licensee, as the case may be, shall continue to be bound by this Agreement and shall beliable to the Province hereunder for all purposes with respect to the Working Interest in the Resource Projectsor the Licences to which such Project Owner or Licensee is no longer entitled. If the Project Owner or Licenseeis no longer entitled to any or all of the Working Interest in the Resource Projects or the Licences as a result ofan involuntary disposition, and the Project Owner or Licensee has, in accordance with clause 16.12, obtained aRoyalty Statement and has paid any Royalty Share shown therein to be due and payable as at the date that itwas no longer so entitled, the Project Owner or Licensee shall have no further liability to the Province for thepayment of any Royalty Share payable in respect of such Working Interest for the period after such date. Uponreceipt by the Province of a Novation Agreement with respect to such Working Interest to which such ProjectOwner or Licensee is no longer entitled executed by such transferee as the defined Assignee thereunder and allother Parties thereto except the Province and provided the Royalty Share then due and payable by such ProjectOwner or Licensee has been paid, the Province shall execute the Novation Agreementwith effect from the dateof such Novation Agreement.
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Notwithstanding anything in the foregoing to the contrary, nothing herein shall lessen or diminish theliability of the Licensee, which is a partner of a Project Owner, to the Province for the obligations of suchProject Owner pursuant to ARTICLE IX until the Province otherwise agrees.
16.8 Restrictions on Security Interests
(a) Each (i) Project Owner and each Licensee, as to itself only, severally covenants and agrees with theProvince that it shall not, by agreement with any Person, create any Security Interest constituting afixed charge, a specific assignment or a floating charge in, upon or with respect to any portion of itsWorking Interest in the Licences or with respect to any portion of its interest in the Charged Premisesor any other Security Interest whatsoever which pursuant to the powers contained within the terms ofsuch other Security Interest permits the holder of such Security Interest to take possession of oracquire title to, seize or sell, any of such Working Interest or interests unless the Project Owner orLicensee granting such Security Interest and the Person to whom such Security Interest has beengranted shall, prior thereto, have executed a Security Holder Agreement; and (ii) Project Owner andeach Licencee, as to itself only, severally covenants and agrees with the Province that it shall notpermit the holder of such Security Interest or any third party acquiring at the direction of such holder tobecome a party to the EL1093 JOA or the P11005 JOA, whichever shall apply, unless a NovationAgreement shall have been executed, in respect of the Working Interest acquired by such Person, bysuch Person and the other Persons then Party to this Agreement (except the Grantor of such SecurityInterest) contemporaneously with execution of any agreement by which any such Person becomes aparty to the EL1093 JOA or the PLIOO5 JOA, whichever shall apply.
(b) The restrictions contained in clause 16.8(a) above shall not apply with respect to a floating chargecreated by a Project Owner or Licensee which applies to the assets, properties and undertaking of suchProject Owner or Licensee generally or is not restricted in its application, or which does not only haveapplication to the Resource Projects, or any Resource Project Assets included therein provided theProject Owner and Licensee shall not restructure or rearrange their affairs for the purpose of fallingwithin the exception herein. The restriction contained in clause 16.8(a) above shall also not apply withrespect to any Security Interest granted by any Project Owner or Licensee to, provided such SecurityInterest has been subordinated to any Security Interest granted herein to the Province, any otherProject Owner or Licensee or Person holding such Security Interest for the benefit of such other ProjectOwner or Licensee or any of such other Project Owners or Licensees.
(c) The Province shall execute any Security Holder Agreement prepared in accordance with the provisionsof this clause 16.8.
(d) Each Project Owner and each Licensee, as to itself only, severally covenants and agrees with theProvince that upon:
(i) realization on any Security Interest which results in an assignment or transfer of, orvesting of title to, all or any part of the Working Interest in the Resource Projects or theLicences to which a Project Owner or Licensee was entitled;
(ii) payment of the Royalty Share then due and payable as required by thisAgreement; and
(iii) such holder of the Security Interest, or a third party acquiring at the direction of suchholder (and which has been approved by the Project Owners as required by the EL1093JOA or the P11005 JOA, whichever shall apply) becoming a party to the EL1093 JOA orthe PLIOO5 JOA, whichever shall apply, as the assignee with respect to such WorkingInterest in the Resource Project or interest in the Licences transferred,contemporaneously with execution of a Novation Agreement;
it shall execute such Novation Agreement.
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16.9 Postponement of Certain Other Liens
(a) Each Project Owner and each Licensee covenants and agrees with the Province that:
(i) it shall not create or suffer to exist any operator’s lien, as defined in the Federal Accord Act,or any other Security Interest in favour of any Person acting in the capacity of a ResourceProject Operator, on or with respect to its Working Interest in EL1093 or PLIOO5,whichever shall apply, or its interest, it any, on any of the Charged Premises unless it,together with the Person to whom such operator’s lien has been granted or in whose favoursuch operator’s lien or other Security Interest exists, as the case may be, shall, priorthereto, have executed an Operator’s Agreement;
(ii) it shall not permit the Person to whom such operator’s lien has been granted or in whosefavour such operator’s lien or other Security Interest exists to become a party to theEL1093 JOA or the PLIOO5 JOA, whichever shall apply, unless such Project Owner orLicensee granting such Security Interest shall have executed such Operator’s Agreement.
(iii) The Province shall execute any Operator’s Agreement prepared in accordance with theprovisions of this clause 16.9.
(iv) Each Project Owner and each Licensee, as to itself only, severally covenants and agreeswith the Province that upon:
(A) realization on any Security Interest which results in an assignment or transfer of, orvesting of title to, all or any part of a Working Interest in the Resource Projects orthe Licences to which a Project Owner or Licensee was entitled;
(B) payment of the Royalty Share then due and payable as required by thisAgreement; and
(C) such holder of the Security Interest, or a third party acquiring at the direction ofsuch holder (and which has been approved by the Project Owners as required bythe EL1093 JOA or the PLIOO5 JOA, whichever shall apply) becoming a party to theEL1093 JOA or the PLIOO5 JOA, whichever shall apply, as the assignee withrespect to such Working Interest in the Resource Projects or the Licencestransferred, contemporaneously with execution of a Novation Agreement,
it shall execute such Novation Agreement.
(b) Each Project Owner and each Licensee covenants and agrees with the Province that:
(i) it shall not create or suffer to exist any lien, charge or any other Security Interest (in thisclause a “Lien”) in favour of a Tariff Administrator, Unit Operator, Service Provider or anyPerson acting in a similar capacity under the Tariff Agreement, the Unit OperatingAgreement or the FOSA on or with respect to its Working Interest in EL1093 or PLIOO5,whichever shall apply, or its interest, if any, on any of the Charged Premises unless it,together with the Person to whom such Lien has been granted or in whose favour such Lienexists, as the case may be, shall, prior thereto, have executed a Security Holder Agreement;
(ii) Each Project Owner and each Licensee, as to itself only, severally covenants and agreeswith the Province that upon:
(A) realization on any Lien which results in an assignment or transfer of, or vesting oftitle to, all or any part of a Working Interest in the Resource Projects or theLicences to which a Project Owner or Licensee was entitled;
(B) payment of the Royalty Share then due and payable as required by thisAgreement; and
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(C) such holder of the Lien, or a third party acquiring at the direction of such holder(and which has been approved by the Project Owners as required by the EL1093JOA or the PLIOO5 JOA, whichever shall apply) becoming a party to the EL1093JOA or the PLIOO5 JOA, whichever shall apply, as the assignee with respect to suchWorking Interest in the Resource Projects or interest in the Licences transferred,contemporaneously with execution of a Novation Agreement,
it shall execute such Novation Agreement.
(c) Each Project Owner and each Licensee covenants and agrees with the Province that:
(I) (A) its claim for payment by any other Project Owner or any other Licensee out ofany of the Charged Premises or proceeds therefrom or thereof; and
(B) any Security Interest granted to it by any other Project Owner or other Licenseeon any of the Charged Premises and its rights thereunder;
are hereby expressly subordinated and postponed to the Security Interest granted tothe Province hereunder, the Province’s entitlement to payment by such other ProjectOwner or Licensee of the Royalty Share out of any of the Charged Premises or anyproceeds thereof or therefrom and the Province’s rights under ARTICLE XIII andARTICLE XXII;
(ii) if it shall receive any payment in respect of such Security Interest before the Provincereceives payment of the Royalty Share as aforesaid, such payment shall be receivedand held in trust by such Project Owner or Licensee, as the case may be, and shall beforthwith paid over to the Province to the extent necessary to pay such RoyaltyShare; and
(iii) it hereby postpones all rights of subrogation which it may acquire in respect of anySecurity Interest granted to the Province herein or the provisions of ARTICLE XIII orARTICLE XXII as a result of payments received by the Province from or instead of thesecurity holder on account of the provisions herein, to payment of such Royalty Share.
(d) The Province acknowledges that to the extent a Project Owner or Licensee makes any payment to theProvince of any Royalty Share payable by any other Project Owner or Licensee, such Project Owner orLicensee making the payment shall be subrogated to the Security Interest granted to the Province bysuch other Project Owner or Licensee; provided however, such subrogated rights shall at all times bepostponed as provided in clause 169(c)(iii).
16.9A Novatlon of Allocation Agreement
Any Novation Agreement pursuant to this ARTICLE XVI shall not be of any force or effect unless anduntil such Novation Agreement includes an assignment and novation of that Project Owner’s or Licensee’sobligations pursuant to the Allocation Agreement in respect of the interest conveyed pursuant to such NovationAgreement.
16.10 Successors
Upon a Successor becoming bound by this Agreement and the Allocation Agreement with respect to aSold Interest, the Successor shall be entitled to all of the benefits and be subject to all of the burdens of thisAgreement and the Allocation Agreement and shall be deemed for all purposes of this Agreement to haveincurred a portion of:
(i) Pre-Development Costs; and
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(ii) Resource Project Eligible Costs;
and to have received a portion of:
(iii) cumulative Gross Transfer Revenue; and
(iv) cumulative Resource Project Incidental Revenue;
and to have paid a portion of:
(v) cumulative Gross Royalty paid by the Project Owner excepting thereout any amount on account ofGross Royalty paid in kind;
(vi) cumulative Net Royalty paid by the Project Owner excepting thereout any amount on account of NetRoyalty paid in kind; and
(vii) cumulative Additional Royalty paid by the Project Owner excepting thereout any amount on account ofAdditional Royalty paid in kind
incurred, received or paid, as the case may be, by the Predecessor prior to the effective time of the transfer ofthe Sold Interest by the Predecessor to the Successor equivalent to the portion of the Working Interest in aResource Project and a Licence or Licences, of the Predecessor that the Successor acquired from thePredecessor. The Successor’s position with respect to Net Royalty Payout and Supplementary Royalty Payoutshall be calculated on the basis of the costs and revenues which this clause deems the Successor to haveincurred and received in accordance with this Agreement including, without restricting the generality of theforegoing, uplifts pursuant to clauses 30.6, 30.7 and Schedule E of the Allocation Agreement, Net RoyaltyReturn Allowance and Supplementary Royalty Return Allowance. For the purposes of calculations madepursuant to this clause, the Successor shall be entitled to the same benefits and obligations pursuant to clause30.3 as was the Predecessor. The Successor shall be in the same position with respect to an EligibleTransportation Costs Deduction-EL1093/PL1005, and the components thereof, and the portion of the interestin a Resource Project and the Licence or Licences acquired by the Successor from the Predecessor as thePredecessor would have been had the Successor not acquired such interest from the Predecessor.
16.11 Division of Liability Between Predecessor and Successor
Subject to clause 16.12 a Successor shall not by virtue of becoming bound by this Agreement becomeliable, and a Predecessor shall not by virtue of having been replaced by the Successor as a Party to thisAgreement be released from liability, to the Province to pay any of the Royalty Share payable and to performany other obligations provided herein to be performed with respect to the Sold Interest relative to the time priorto the effective time, as agreed between the Successor and the Predecessor, of the transfer of the SoldInterest from the Predecessor to the Successor. The Province acknowledges that the Predecessor shall bereleased from any liability to the Province for any obligation under this Agreement relative to the time after theeffective time of the transfer of the Sold Interest, as agreed between the Successor and the Predecessor,provided such effective time is not a date during which any Royalty Share due and payable by suchPredecessor remains unpaid.
16.12 Successor’s Liability
(a) The Province may at any time after any Royalty Share due and payable by a Project Owner (forpurposes of this clause 16.12 a “Defaulting Owner”) has not been paid and while such default iscontinuing, give notice of such default to the other Project Owners. A Project Owner may at any timewith respect to itself and any Project Owner may at any time with respect to a Defaulting Owner whilethe default is continuing, request from the Province a statement (the “Royalty Statement”) as to theamount of the Royalty Share then due and payable by it or the Defaulting Owner pursuant to thisAgreement with respect to any part of its or the Defaulting Owner’s Working Interest (the “Applicable
34
Interest”). The Project Owner may request the Royalty Statement as at a particular date (the“Statement Date”) to be indicated in such request provided such date is not more than 20 days afterthe date of receipt by the Province of the request for same. The Province shall provide the RoyaltyStatement not more than 15 days after the date of receipt of the request for same, provided, however,that if the Project Owner indicates in the request that the Royalty Statement is to be used in connectionwith a sale by such Project Owner of the Applicable Interest in a Resource Project or a Licence orLicences, the Province shall not be required to deliver the Royalty Statement to the Project Owner morethan 5 days prior to the date specified in such notice as the closing date of such sale. A Project Ownershall not make an unreasonable number of requests for a Royalty Statement. The Royalty Statementshall be provided by the Province without any conditions or qualifications contained therein.
(b) The Royalty Statement shall set out the amount of the Royalty Share due and payable (or, if therequest is made by or in respect of a Defaulting Owner, due and payable and estimated will bepayable) as at the date of delivery of such statement (the “Delivery Date”), or where requested, as atthe Statement Date. The Royalty Statement shall also set forth the additional filings, if any, that will bedue on account of the Royalty Share prior to the earlier of the Statement Date and the Delivery Date.
(c) If a Royalty Statement was obtained by a Project Owner or a Defaulting Owner, as the case may be, inrespect of an Applicable Interest which indicated that a Royalty Share amount was due and payable(or, in respect of a Defaulting Owner, due and payable and estimated will be payable) as at theStatement Date or the Delivery Date, as the case may be, in respect of such Applicable Interest andthat all filings on account of such Royalty Share amount which were due had been made, then, if suchRoyalty Share due and payable (or due and payable and estimated will be payable, as the case maybe), is paid by the Predecessor, the Successor or, in the case of a Defaulting Owner, the other ProjectOwners, to the Province, the Successor will not be liable to pay to the Province any Royalty Sharepayable by the Predecessor to the Province in respect of such Applicable Interest as at the StatementDate or the Delivery Date, as the case may be.
(d) If a Royalty Statement was obtained by a Project Owner or a Defaulting Owner, as the case may be, inrespect of an Applicable Interest which indicated that a Royalty Share was due and payable (or due andpayable and estimated will be payable, as the case may be), as at the Statement Date or the DeliveryDate, as the case may be, in respect of such Applicable Interest, then, if such Royalty Share amount isnot paid to the Province, the Successor will be liable to pay to the Province such Royalty Share amountand, upon payment by the Successor or any other Person of such Royalty Share amount, the Successorwill have no further liability to the Province for the payment of any Royalty Share due and payable orestimated will be payable by the Predecessor to the Province in respect of such Applicable Interest asat the Statement Date or the Delivery Date, as the case may be.
(e) If a Royalty Statement was obtained by a Project Owner or a Defaulting Owner, as the case may be, inrespect of an Applicable Interest which indicated that additional filings on account of the Royalty Sharewere then due and such additional filings were not made, then the Successor will be liable to theProvince for the Royalty Share, if any, payable by the Predecessor to the Province in respect of suchApplicable Interest as at the Statement Date or the Delivery Date, as the case may be, as aconsequence of such filings.
(f) If a Royalty Statement was not obtained by a Project Owner in respect of an Applicable Interest, thenthe Successor will be liable to pay to the Province any Royalty Share then due and payable (or due andpayable and estimated will be payable, as the case may be), by the Predecessor to the Province inrespect of such Applicable Interest.
(g) If a Royalty Statement was requested by a Project Owner or a Defaulting Owner, as the case may be, inrespect of an Applicable Interest as at a particular Statement Date in accordance with the provisions ofthis clause 16.12 and is not delivered by the Province to such Project Owner or a Defaulting Owner, asthe case may be, in accordance herewith, then the Successor will not be liable to pay to the Province ()iany Royalty Share due and payable as would be payable by the Predecessor to the Province as at such
35
Statement Date, or the date of deemed delivery by the Province hereunder, if no Statement Date wasrequested.
(h) A Project Owner proposing to sell all or any part of its Working Interest in a Licence or Licences (a“Seller”) hereby authorizes the Province to deliver to the Person proposing to purchase such WorkingInterest (a “Purchaser”) a copy of any Royalty Statement delivered to the Seller in connection with suchsale, provided that the Purchaser (if the Seller is not a Defaulting Owner) provides to the Province acopy of a signed authorization from the Seller or a signed sale agreement between the Seller and thePurchaser with respect to such Working Interest and, if a Royalty Statement has not been requested bythe Seller in connection with such sale, to provide to the Purchaser, at its request if the Seller is aDefaultingOwner, and in accordancewith theterms hereof, a RoyaltyStatementwith respecttosuchWorking Interest which shall be treated as a Royalty Statement for the purposes of this clause 16.12.
(i) If by reason of the Seller’s failure to make the filings required of it hereunder prior to the Delivery Date,the Province does not have the necessary information to prepare a Royalty Statement which isrequested by a Purchaser with respect to such Working Interest pursuant to paragraph (h) above andthe Seller will not or cannot provide such information, then the Project Owners (other than the Seller)shall, at the request of the Province, advise the Province of the amount of Hibernia CrudeEL1093/PLIOO5 delivered to or to the account of, the Seller for the Months, necessary in order toenable the Province to prepare the Royalty Statement. In addition, and if requested by the Province,such other Project Owners shall also advise, as to any liftings scheduled for such Defaulting ProjectOwner prior to the Statement Date. The Province shall:
(i) estimate the Royalty Share due and payable by the Seller in respect of such Working Interestas at the Statement Date or the Delivery Date, as the case may be, using the weighted averageTransfer Prices of the Project Owners (other than the Seller) during the applicable Months, and
(ii) estimate any Royalty Share not included in (i) above that would be payable for the period priorto the Statement Date or the Delivery Date, as the case may be, calculated on the amount ofHibernia Crude EL1093/PLIOO5 delivered to or to the account of (or projected by the Provinceto have been or will be delivered to or to the account of) the Seller and using the weightedaverage of such Transfer Prices for the Month most recently reported by the Project Owners(other than the Seller), and
the amount of the Royalty Share due and payable (or due and payable and estimated will bepayable, as the case may be), by the Seller in respect of such Working Interest for the purposesof the Royalty Statement as at the Statement Date shall for the purposes of this clause 16.12equal such estimate.
(j) If any Person who has acquired or is acquiring its interest from a Defaulting Owner (whether or notpursuant to a Security Interest, sale or other disposition of a Working Interest) becomes a party to theEL1093 JOA or the PLIOO5 JOA, whichever shall be applicable to the Sold Interest, prior to the RoyaltyShare then due and payable (and estimated to be payable by the Province in accordance with theforegoing provisions) having been paid, then in addition to the other rights and remedies of theProvince hereunder, the Project Owners shall jointly and severally be liable to the Province for paymentof and shall forthwith pay to the Province on demand by it such Royalty Share then due and payableand then estimated will be payable in accordance with the foregoing provisions.
16.13 Treatment of Sale Consideration
The consideration paid by a Successor for the Sold Interest shall not be a Resource Project Eligible Costor an Eligible Transportation Cost and shall not form part of Gross Transfer Revenue, Resource ProjectIncidental Revenue or otherwise enter into any calculation made pursuant to this Agreement.
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16.14 LimItation on Marketing Costs
In the event, and upon, a Person other than a Party to this Agreement becoming entitled to a WorkingInterest in a Resource Project or a Licence or Licences, then each cost of that Person which would otherwise bea Resource Project Eligible Marketing Cost shall not qualify as a Resource Project Eligible Marketing Cost, aResource Project Eligible Cost or an Eligible Transportation Cost unless the Province agrees thereto.
16.15 Interpretation
For the purposes of this ARTICLE XVI:
(a) “Royalty Share then due and payable”, “Royalty Share was due and payable”, “Royalty Share due andpayable” or any such similar phrase shall mean as at any specified date the amount of Royalty Sharewhich is actually due and payable on that date based upon all filings of the Project Owner requiredprior to that date. Such amount shall specifically not include any amounts on account of Royalty Sharewhich may be subsequently determined to be due and payable as a result of any redetermination orrecalculation, any annual reconciliation pursuant to clause 24.7 or pursuant to any audit or arbitrationcarried out hereunder;
(b) “sell, assign, transfer or otherwise dispos&, “sale, assignment, transfer or other disposition” or anysuch similar phrase includes only dispositions which result in the Person disposing no longer beingentitled to a beneficial interest or bare legal interest or an interest of record with respect to theWorking Interest disposed of and specifically such phrase shall not include any such act effected forthe purposes of providing a Security Interest.
PART III: ROYALTY PROVISIONS
ARTICLE XVII: SCOPE OF PROJECT FOR ROYALTY PURPOSES
17.1 Hibernia Crude EL1093/PLIOO5
This Agreement sets forth the agreement among the Parties hereto with respect to the royalties,interest and penalties payable with respect to Hibernia Crude EL1093/PLIOO5 only.
17.2 Natural Gas Consumed
Any Natural Gas produced pursuant to PLIOOI, PL1005 or EL1093 that is reinjected, consumed, flaredor lost within the Resource Project (as such term is defined in the PLIOOI Hibernia Royalty Agreement), theResource Project-PLIOO5, or the Resource Project-EL1093, shall be exempt from royalties under thisAgreement.
17.3 Natural Gas Royalty
The Project Owners, or any of them, shall not sell or use for any purpose (other than as contemplated inclause 17.2) outside a Resource Project any Petroleum produced pursuant to the respective Licence other thanHibernia Crude EL1093/PLIOO5 until a royalty relative thereto has been provided for underthe Petroleum andNatural Gas Act. Any cost incurred by the Project Owners, or any of them, relative to the construction,purchase, leasing or other acquisition or operation by such Resource Project of any facilities primarily for theexploration for or production, preparation for transport, storage, loading, off-loading, environmental protectionor studies in relation thereto of Petroleum other than Hibernia Crude EL1093/PLIOO5 or Solution Gas shall notbe a Resource Project Eligible Cost-EL1093 or a Resource Project Eligible Cost-PLIOO5, as the case may be, anEligible Transportation Cost or a deduction in the calculation of Gross Transfer Revenue or Sale Price unless the
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Province agrees thereto in writing. For greater certainty, this provision shall also apply to any gas from PLIOO1that has been reinjected or otherwise stored on the lands that are the subject of PLIOO5 or EL1093.
17.4 Processing and Storage
(I) EL1093
Prior to any Resource Project Assets-EL1093 being used to process or store petroleum which is notproduced pursuant to EL1093, the EL1093 Project Owners shall give the Province reasonable writtennotice and full particulars of their intentions in this regard and thereafter the EL1093 Project Ownersshall not use any Resource Project Assets-EL1093 to process or store petroleum which is not producedpursuant to EL1093 unless the EL1093 Project Owners and the Province agree as to the manner inwhich the revenues from such processing or storage are to be taken into account for the purposes ofthis Agreement. A cost incurred by the EL1093 Project Owners, or any of them, relative to theconstruction, purchase, leasing or other acquisition or operation by the Resource Project-EL1093 of anyfacilities relative to the processing or storage of petroleum which is not produced pursuant to EL1093shall not be a Resource Project Eligible Cost-EL1093, an Eligible Transportation Cost or a deduction inthe calculation of Gross Transfer Revenue or Sale Price unless the Province agrees thereto in writing.
(ii) PLIOO5
Prior to any Resource Project Assets-PLIOO5 being used to process or store petroleum which is notproduced pursuant to PLIOO5, the PLIOO5 Project Owners shall give the Province reasonable writtennotice and full particulars of their intentions in this regard and thereafter the PLIOO5 Project Ownersshall not use any Resource Project Assets-PLIOO5 to process or store petroleum which is not producedpursuant to PLIOO5 unless the PLIOO5 Project Owners and the Province agree as to the manner inwhich the revenues from such processing or storage are to be taken into account for the purposes ofthis Agreement. A cost incurred by the P11005 Project Owners, or any of them, relative to theconstruction, purchase, leasing or other acquisition or operation by the Resource Project-PLIOO5 ofany facilities relative to the processing or storage of petroleum which is not produced pursuant toPLIOO5 shall not be a Resource Project Eligible Cost-PLIOO5, an Eligible Transportation Cost or adeduction in the calculation of Gross Transfer Revenue or Sale Price unless the Province agrees theretoin writing.
ARTICLE XVIII: ROYALTY STRUCTURE
18.1 Grant of Royalties
For and in consideration of the valuable consideration expressed for this Agreement generally, eachProject Owner and, where the Project Owner is a partnership, the Licensee (to the extent of the Licensee’sinterest, if any, in a Licence) which is an Affiliate of that Project Owner, hereby conveys, grants, reserves,bargains, sells, assigns, transfers and sets over unto the Province, and the successors and assigns of theProvince, all of the right, title, estate, interest, benefit, property, claim and demand of the Project Owner and, ifany, such Licensee, whatsoever, both at law and in equity, of, in and to the Gross Royalty, the Net Royalty, theSupplementary Royalty and the Additional Royalty provided for, and as set forth, in this Agreement, the GrossRoyalty, Net Royalty, Supplementary Royalty and the Additional Royalty being free and clear of allencumbrances whatsoever (except any as may be in favour of Canada) created by, through or under suchProject Owner and, where the Project Owner is a partnership, the partners of such Project Owner and theLicensee which is an Affiliate of such Project Owner.
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18.2 Generally
The royalty structure for Hibernia Crude EL1093/PLIOO5 is comprised of a Gross Royalty, a NetRoyalty, a Supplementary Royalty and an Additional Royalty.
18.3 Separate Liability for Royalty
Each Project Owner is separately responsible and liable for the calculation and payment to the Provinceof all Gross Royalty, Net Royalty, Supplementary Royalty and Additional Royalty payable to the Province by thatProject Owner pursuant to this Agreement.
18.4 Separate Determinations by Project Owners
Each Project Owner shall separately determine its Gross Transfer Revenue, Resource Project EligibleMarketing Costs, Net Royalty Payout and Supplementary Royalty Payout.
18.5 Risk in Transport
The amount of the Royalty Share payable by a Project Owner shall not be reduced on account of anyHibernia Crude EL1093/PLIOO5 owned by the Project Owner which is lost in transit of Hibernia Blend. GrossRoyalty, Net Royalty, Supplementary Royalty and Additional Royalty payable with respect to any Hibernia CrudeEL1093/PL1005 transferred by or to the account of a Project Owner into marine tankers at the Loading Pointshall not be diminished or affected in the event that all or any part of such Hibernia Crude EL1093/PLIOO5 islost or damaged prior to reaching the Sale Point. In the event that part, but not all, of the Hibernia CrudeEL1093/PLIOO5 transferred by or to the account of a Project Owner into a marine tanker at the Loading Pointis lost prior to reaching the Sale Point, the Sale Price for the lost Hibernia Crude EL1093/PLIOO5 shall be thesame as for the Hibernia Crude EL1093/PLIOO5 which does reach the Sale Point in an undamaged state. Inthe event that all of the l-libernia Crude ELIO93/PLIOO5 transferred by or to the account of a Project Ownerinto a marine tanker at the Loading Point does not reach the Sale Point, the Gross Transfer Revenue for suchHibernia Crude EL1093/PLIOO5 shall be the Project Owner’s most recent Transfer Price multiplied by thevolume of Hibernia Crude EL1093/PLIOO5 transferred by or to the account of that Project Owner at theLoading Point and which was subsequently lost. Notwithstanding any of the provisions of this clause, theProject Owners shall not be required to assume the risk of, and royalty hereunder shall not be payable on, anyHibernia Crude EL1093/PLIOO5 lost due to shrinkage in transit.
ARTICLE XIX: GROSS ROYALTY
19.1 Gross Royalty Term
Gross Royalty is payable pursuant to this Agreement from the commencement of production ofHibernia Crude EL1093/PLIOO5 and terminates upon the earlier of production of Hibernia CrudeEL1093/PL1005 ceasing or this Agreement being terminated pursuant to the provisions of this Agreement.
19.2 Gross Royalty Payable
The Gross Royalty payable by a Project Owner with respect to any Month is a share of the HiberniaCrude EL1093/PLIOO5 transferred by or to the account of the Project Owner into marine tankers at theLoading Point during the Month (which includes any Hibernia Crude EL1093/PL1005 taken in kind by theProvince in respect of that Project Owner during that Month) having a value equal to the product obtained bymultiplying:
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(i) the sum of the Gross Transfer Revenue of the Project Owner for the Month plus the In-Kind Value forthe Project Owner for the Month;
by
(ii) the Gross Royalty Rate in effect for the Month.
19.3 Gross Royalty Rates
The Gross Royalty Rate shall be 5%.
ARTICLE XX: NET ROYALTY
20.1 Net Royalty Term
Net Royalty commences to be payable by a Project Owner pursuant to this Agreement at the beginningof the Month in which Net Royalty Payout occurs for the Project Owner. No Net Royalty is payable in respect ofany Month prior to the Month in which Net Royalty Payout occurs.
20.2 Annual Net Royalty Amount
The Net Royalty payable by a Project Owner with respect to a Period is a share of the Hibernia CrudeEL1093/PLIOO5 transferred by or to the account of the Project Owner into marine tankers at the LoadingPoint (which includes any Hibernia Crude EL1093/PLIOO5 taken in kind by the Province in respect of thatProject Owner during that Period), with a value equal to thirty per cent (30%) of the Net Transfer Revenue of theProject Owner for the Period.
20.3 Monthly Calculation
For the purposes of calculating the amount of Net Royalty payable by a Project Owner pursuant toclause 20.2 in respect of any Month of a Period, the Net Royalty payable by a Project Owner shall be calculatedwith respect to each Month using cumulative Net Transfer Revenue from the start of the Period to the end ofthat particular Month of the Period. The Net Royalty payable by a Project Owner at the end of a particularMonth of a Period shall be thirty per cent (30%) of the Net Transfer Revenue of the Project Owner for the Periodto the end of that Month less the sum of the Net Royalty paid by the Project Owner with respect to the priorMonths of that Period.
20.4 Credit of Gross Royalty
The amount of Gross Royalty paid by a Project Owner with respect to a Period or with respect to aportion of a Period from the start of the Period to the end of any Month of the Period shall be a credit againstthe amount of Net Royalty payable by the Project Owner with respect to that Period or that portion of thatPeriod. The amount of Gross Royalty paid by a Project Owner with respect to a Period shall serve to reduce theamount of Net Royalty payable by the Project Owner with respect to the Period to an amount not less than zeroand shall not result in any negative amount of Net Royalty payable with respect to the Period to be carriedforward for application in the following Period.
20.5 Net Royalty Surplus
If, at the end of any Month during a Period, cumulative Net Royalty paid for the Period by a ProjectOwner exceeds cumulative Net Royalty payable for the Period by the Project Owner, then the amount of suchexcess shall be applied by the Project Owner as a credit against cumulative Gross Royalty, Supplementary
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Royalty and Additional Royalty then payable by the Project Owner or thereafter payable by the Project Owner tothe end of the Period. Any such excess existing at the end of the Period shall be paid in cash by the Province tothe Project Owner in accordance with clause 24.7.
20.6 For Greater Certainty
For greater certainty, with respect to any Period after Net Royalty Payout, cumulative Gross Royalty pluscumulative Net Royalty paid by a Project Owner with respect to that Period shall not exceed the greater of:(i) five per cent (5%) of the sum of Gross Transfer Revenue of the Project Owner and the In-Kind Value for
the Project Owner with respect to that Period; or
(ii) thirty per cent (30%) of the Net Transfer Revenue of the Project Owner with respect to that Period.
20.7 Excess Eligible Costs
If, in any Period after Net Royalty Payout, the sum of:
(i) the Gross Transfer Revenue of a Project Owner received during the Period; plus
(ii) the Project Owner’s Working Interest share of Resource Project Incidental Revenue received during thePeriod; plus
(iii) the In-Kind Value for the Project Owner for the Period,
is exceeded by:
(iv) the Project Owner’s Working Interest share of Resource Project Eligible Costs paid during the Period,other than Tariffs;
(v) the Project Owner’s share of Resource Project Eligible Costs paid during the Period for Tariffs asdetermined pursuant to Article 22 of the Allocation Agreement; plus
(vi) the Resource Project Eligible Marketing Costs paid by the Project Owner during the Period,
the amount of the excess shall be carried forward as a Resource Project Eligible Cost to the following Period,without increase pursuant to any of clauses 30.6 or 30.7 and without increase for uplifts pursuant to ScheduleE of the Allocation Agreement but shall not be carried back to any preceding Period.
ARTICLE XXI: SUPPLEMENTARY ROYALTY
21.1 Supplementary Royalty Term
Supplementary Royalty commences to be payable by a Project Owner pursuant to this Agreement atthe beginning of the Month in which Supplementary Royalty Payout occurs for the Project Owner. NoSupplementary Royalty is payable in respect of any Month prior to the Month in which Supplementary RoyaltyPayout occurs.
21.2 Annual Supplementary Royalty Amount
The Supplementary Royalty payable by a Project Owner with respect to a Period is a share of theHibernia Crude EL1093/PLIOO5 transferred by or to the account of the Project Owner into marine tankers atthe Loading Point (which includes any Hibernia Crude EL1093/PLIOO5 taken in kind by the Province in respectof that Project Owner during that Period), with a value equal to twelve and one-half per cent (12.5%) of the NetTransfer Revenue of the Project Owner for the Period.
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21.3 Monthly Calculation
For the purposes of calculating the amount of Supplementary Royalty payable by a Project Ownerpursuant to clause 21.2 in respect of any Month of a Period, the Supplementary Royalty payable by a ProjectOwner shall be calculated with respect to each Month using cumulative Net Transfer Revenue from the start ofthe Period to the end of that particular Month of that Period. The Supplementary Royalty payable by a ProjectOwner at the end of a particular Month of a Period shall be twelve and one-half per cent (12.5%) of the NetTransfer Revenue of the Project Owner for the Period to the end of that Month less the sum of theSupplementary Royalty paid by the Project Owner with respect to prior Months of that Period.
21.4 Deduction of Gross Royalty
If, after Supplementary Royalty Payout, with respect to any Period or with respect to a portion of aPeriod from the start of that Period to the end of any Month of that Period, no Net Royalty is payable, then theGross Royalty paid by a Project Owner with respect to that Period shall be deducted from the Net TransferRevenue of the Project Owner for that Period for purposes of calcuiatingthe Supplementary Royalty payable bythe Project Owner with respect to that Period.
21.5 Supplementary Royalty Surplus
If, at the end of any calendar month during a Period, cumulative Supplementary Royalty paid for thePeriod by a Project Owner exceeds cumulative Supplementary Royalty payable for the Period by the ProjectOwner, then the amount of such excess shall be applied by the Project Owner as a credit against cumulativeGross Royalty, Net Royalty and Additional Royalty then payable by the Project Owner or thereafter payable bythe Project Owner to the end of the Period. Any such excess existing at the end of the Period shall be paid incash by the Province to the Project Owner in accordance with clause 24.7.
21.6 Supplementary Royalty Index
In the event that the index constituting, from time to time, the Supplementary Royalty Index becomesobsolete, no longer available or no longer appropriate for the purposes of this Agreement, then the Partieshereto shall select a new index to be the Supplementary Royalty Index and, if required, shall make suchtransitional arrangements relative to the new index as are reasonable. In the event that the Parties heretodisagree as to whether an index then constituting the Supplementary Royalty Index is obsolete, no longeravailable or no longer appropriate for the purposes of this Agreement or disagree as to the selection of a newindex, then either the Project Owners or the Province may submit the disagreement to arbitration and thearbitrators, if required, may determine an appropriate replacement index.
ARTICLE XXIVA: ADDITIONAL ROYALTY
21A.1 Additional Royalty Term
Additional Royalty commences to be payable by a Project Owner pursuant to this Agreement at thebeginning of the Month in which Net Royalty Payout occurs for the Project Owner. No Additional Royalty ispayable in respect of any Month prior to the Month in which Net Royalty Payout occurs.
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21A2 Annual Additional Royalty Amount
The Additional Royalty payable by a Project Owner with respect to a Period is a share of the HiberniaCrude EL1093/PLIOO5 transferred by or to the account of the Project Owner into marine tankers at theLoading Point (which includes any Hiberruia Crude EL1093/PLIOO5 taken in kind by the Province in respect ofthat Project Owner during that Period) which was subject to Additional Royalty, with a value equal to the sum ofthe Additional Royalty payable for each Month of that Period. Additional Royalty payable for each Month of thatPeriod is calculated as follows:
(i) two and one half per cent (2.5%) of the Net Transfer Revenue of the Project Owner for that Month if thearithmetic average of the WTI Price for the month is greater than or equal to US $50 (not adjusted forinflation) but less than US $70 (not adjusted for inflation); or
(ii) seven and one half per cent (7.5%) of the Net Transfer Revenue of the Project Owner for that Month ifthe arithmetic average of the WTI Price for the month is greater than or equal to US $70 (not adjustedfor inflation).
21A.3 Monthly Calculation
For the purposes of calculating the amount of Additional Royalty payable by a Project Owner pursuantto clause 21A.2 in respect of any Month of a Period, the Additional Royalty payable by a Project Owner shall becalculated with respect to each Month using the Net Transfer Revenue from the beginning of that particularMonth to the end of that particular Month of the Period. The Additional Royalty payable by a Project Owner atthe end of a particular Month of a Period shall be:
(I) two and one half per cent (2.5%) of the Net Transfer Revenue of the Project Owner for that Month if thearithmetic average of the WTI Price for that Month is greater than or equal to US $50 (not adjusted forinflation) but less than US $70 (not adjusted for inflation);or
(ii) seven and one half per cent (7.5%) of the Net Transfer Revenue of the Project Owner for that Month ifthe arithmetic average of the WTI Price for that Month is greater than or equal to US $70 (not adjustedfor inflation).
21A.4 Deduction of Gross Royalty
If, after Supplementary Royalty Payout, with respect to any Period or with respect to a portion of aPeriod from the start of that Period to the end of any Month of that Period, no Net Royalty is payable, then theGross Royalty paid by a Project Owner with respect to that Period shall be deducted from the Net TransferRevenue of the Project Owner for that Period for purposes of calculating the Additional Royalty payable by theProject Owner with respect to that Period.
21A.5 Additional Royalty Surplus
If, at the end of any calendar month during a Period, cumulative Additional Royalty paid for the Periodby a Project Owner exceeds cumulative Additional Royalty payable for the Period by the Project Owner, thenthe amount of such excess shall be applied by the Project Owner as a credit against cumulative Gross Royalty,Net Royalty and Supplementary Royalty then payable by the Project Owner or thereafter payable by the ProjectOwner to the end of the Period. Any such excess existing at the end of the Period shall be paid in cash by theProvince to the Project Owner in accordance with clause 24.7.
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ARTICLE XXII: TAKING IN KIND
22.1 Provincial Right
The Province may, subject to the other provisions of this Article, take in kind and separately dispose ofthe Royalty Share of a Project Owner of Hibernia Blend. During the time that the Province is entitled to take theRoyalty Share in kind, the Project Owner from whom the Province is taking the Royalty Share in kind shall,while the Royalty Share is accumulating for the time required to allow the taking of the Royalty Share in kindand thereafter until actually taken by the Province, be relieved of all obligations to pay the Royalty Share inmoney in respect of any Hibernia Blend transferred at the Loading Point by or to the account of the ProjectOwner during such time but the Project Owner shall not be relieved of its obligation to deliver the Royalty Sharein kind.
22.2 Notice by Province
Written notice to take or stop taking in kind the Royalty Share must be given by the Province to aProject Owner not less than six (6) Months in advance of the effective date set forth in such notice upon whichthe Province will commence or discontinue taking in kind. Notwithstanding the foregoing, in the event that theProvince decides to take the Royalty Share from a Project Owner in kind because the Project Owner is indefault of payment to the Province of any of the Royalty Share payable by the Project Owner pursuant to thisAgreement, then the Province need only give the Project Owner thirty (30) days prior written notice of theeffective date upon which the Province will commence to take the Royalty Share from the Project Owner inkind. The Province may amend information provided in a notice under this clause 22.2 without affecting thetime period required under such notice. In the event that any contract entered into by a Project Owner for thesale of its share of Hibernia Blend does not allow for the Province to take the Royalty Share from a ProjectOwner in the manner and circumstances provided for in this clause, then the Project Owner shall nonethelesscause to be delivered to the Province the Hibernia Blend to be delivered in kind to the Province.Notwithstanding the other provisions of this clause, a notice given by the Province to take the Royalty Share inkind may only be effective on the first day of a Month and a notice given by the Province to stop taking theRoyalty Share in kind may only be effective on the last day of a Month.
22.3 Adjustment at End of Take in Kind Period
If, at the effective date of a notice from the Province to discontinue taking the Royalty Share in kindfrom a Project Owner, the Province has taken in kind more or less than the Royalty Share to which the Provincewas entitled to such effective date, then the Province, in the event that it has taken in kind on account of theRoyalty Share more than it was entitled, or the Project Owner, in the event that the Province had taken in kindon account of the Royalty Share less than it was entitled, shall pay to the other an amount which is the productof the number of Barrels of Hibernia Blend taken in excess or not taken, respectively, by the Province, as thecase may be, multiplied by the most recent Transfer Price for the Project Owner.
22.4 ProvincIal Costs
When taking the Royalty Share in kind from a Project Owner, the Province shall be responsible and payfor the full cost, on a commercial basis, of handling, storing (except storage prior to the delivery of HiberniaBlend to the Province), transporting and marketing beyond the Loading Point the Hibernia Blend taken by theProvince in kind. Notwithstanding the foregoing, the charge for such services shall not exceed the terms thatare customary for that Project Owner for such services.
22.5 Royalty Lifting Agreement
(a) Any Project Owner or the Province may provide notice to the other Parties that the ice or such DLZ
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Project Owner desires to commence negotiations with respect to a lifting agreement for Royalty Sharetaken in kind under this Agreement (the “Royalty Lifting Agreement”). If the Province delivers a noticepursuant to clause 22.2 to take Royalty Share in kind then the Province shall deliver at the same timea notice of its desire to commence negotiations with respect to a Royalty Lifting Agreement.
(b) Within thirty (30) days of the date of receipt of a request under subsection (a), the Province and theProject Owners shall commence negotiations with respect to the Royalty Lifting Agreement.
(c) A Royalty Lifting Agreement entered into as a result of a request under this clause shall include theterms and conditions of the delivery to the Province of Hibernia Blend, including:
(I) the calculation of the volume of 1-libernia Blend to be taken in kind at any one time;
(ii) the delivery options of the Province;
(iii) the scheduling methodology to ensure that the Province has a frequency of delivery thatis commensurate with the volume of Hibernia Blend that the Province is taking in kindfrom all Project Owners;
(iv) details respecting the satisfaction of the obligations under this Article of:
1. the Project Owner from whom the Province is taking in kind to lift, transportr storeand deliver Hibernia Blend taken in kind by the Province,
2. the provision by other Project Owners of access to lift, transport, store and deliverHibernia Blend taken in kind to locations required-by the Province, and
3. the provision by other Project Owners of access to and capacity to store andtransship Hibernia Blend taken in kind by the Province at the Whiffen HeadTransshipment Terminal.
The Province and the Project Owners acknowledge that it is desirable for the Royalty Lifting Agreementto make provisions compatible, and for the form and provisions to be as similar as reasonable, with theProject Owners’ Lifting Agreement.
(d) Where a Royalty Lifting Agreement cannot be concluded within four (4) months after a request undersubclause (a), the Province or a Project Owner who is a party to the negotiations in respect of theRoyalty Lifting Agreement may refer the matter to arbitration and a decision of an arbitrator on theagreement is final and binding.
(e) Where a matter has been referred to arbitration under subsection (d), the arbitrator is limited to adetermination that is the specific offer of settlement by either the:
(i) Province before the matter was referred to arbitration; or(ii) Project Owners before the matter was referred to arbitration.
(f) If the Project Owners and the Province enter into a Royalty Lifting Agreement pursuant to this clause22.5 or a determination is made by an arbitrator pursuant to subclause 22.5(e), then such RoyaltyLifting Agreement shall be deemed to also be the Royalty Lifting Agreement for the purposes of thePLIOOJ. Hi bernia Royalty Agreement.
22.5A Obligations of Project Owners
Where a notice has been given to a defaulting Project Owner under clause 22.2 the Province may givenotice to the other Project Owners requiring the other Project Owners:
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(a) to store on behalf of and make available to the Province, Hibernia Blend stored by the Project Ownerson behalf of the defaulting Project Owner;
(b) when storage space is available and the Province is not otherwise in a position to take delivery ofHibernia Blend scheduled to be delivered to the defaulting Project Owner, to store that Hibernia Blendon behalf of the Province;
(c) not to allow the delivery of Hibernia Blend to the defaulting Project Owner or another Person claimingthrough that defaulting Project Owner;
(d) not to interfere with scheduled rights of the defaulting Project Owner to take delivery of Hibernia Blendwhere the Province requires those rights in order to take in kind, notwithstanding that these rights mayhave been directly or indirectly affected by the default of the defaulting Project Owner; and
(e) to generally co-operate in the provision of lifting scheduling, transportation scheduling and deliveryplans of the defaulting Project Owner.
22.6 Transportation and Storage for the Province
(a) After the notice period required under clause 22.2 has expired, the Province may require delivery ofHibernia Blend at the Loading Point with respect to Royalty Share taken in kind.
(b) Delivery of Hibernia Blend to the Province shall be considered to be completed where that HiberniaBlend is delivered to a marine tanker at the Loading Point as directed by the Province or, where aRoyalty Lifting Agreement exists, pursuant to that agreement.
(c) The Royalty Lifting Agreement shall provide for the delivery of Hibernia Blend with respect to RoyaltyShare taken in kind in order to facilitate an orderly transfer of that 1-libernia Blend to the Provincewithout significant disruption to the activities of the Project Owners. In the absence of a Royalty LiftingAgreement, the Province shall consult with all Project Owners with respect to the delivery of HiberniaBlend with respect to Royalty Share taken in kind in order to facilitate an orderly transfer of theHibernia Blend without significant disruption to the activities of the Project Owners.
(d) A Project Owner must deliver Royalty Share in kind when given notice to do so under this Articlenotwithstanding another obligation that that Project Owner may have under a contract with respect tothe Hibernia Blend taken in kind.
(e) All Project Owners must facilitate and assist the Province in taking in kind, including, but not limited to,lifting, transporting, storing, transshipment and delivery.
(f) Hibernia Blend remains at the risk of the Project Owners from whom that Hibernia Blend is being takenin kind until that Hibernia Blend that is being taken in kind is delivered to the Province at the LoadingPoint as directed by the Province or, where a Royalty Lifting Agreement exists, pursuant to thatagreement.
(g) Where the Province requires access to the Whiffen Head Transshipment Terminal or a marine tankerfor the storage, transshipment or transport of Hibernia Blend taken in kind with respect to RoyaltyShare, that access shall be supplied to the Province on the terms that are customary for access by theProject Owner from whom Royalty Share is being taken in kind.
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22.7 Royalty Entitlement Prior to Payout
Prior to Net Royalty Payout, the volume of Hibernia Blend to be taken in kind by the Province in respectof Gross Royalty payable to the Province by a Project Owner for a Month shall be the product obtained whenthe Gross Royalty Rate in effect for the Month, as provided in clause 19.3, is multiplied by the total volume ofHibernia Blend transferred during the Month by or to the account of the Project Owner into marine tankers atthe Loading Point (which shall include any Hibernia Blend taken in kind by the Province in respect of thatProject Owner during that Month). Notwithstanding the foregoing, in the event that payment relative to thesale of Hibernia Blend is received by a Project Owner prior to the delivery of the Hibernia Blend by the ProjectOwner, the amount of such payment shall be divided by that Project Owner’s Transfer Price for the Month inwhich such payment is received and the resultant volume of Hibernla Blend shall, for the purposes ofcalculations pursuant to the first sentence of this clause, be added to the total volume of Hibernia Blendtransferred during the Month by or to the account of the Project Owner into marine tankers at the LoadingPoint. Any volume of Hibernia Blend which is transferred by or to the account of a Project Owner into marinetankers at the Loading Point in a Month and which corresponds to a volume of Hibernia Blend for which theProject Owner received payment in a previous Month and which payment was taken into account forcalculation of the Royalty Share of the Project Owner for a previous Month, shall not be Included in the volumeof Hibernia Blend delivered to or to the account of that Project Owner for that Month for the purposes ofcalculations pursuant to this clause.
22.8 Royalty Entitlement After Payout
After Net Royalty Payout, the volume of Hibernia Blend to be taken in kind by the Province in respect ofGross Royalty, Net Royalty, Supplementary Royalty, and Additional Royalty payable to the Province by a ProjectOwner for a Month shall be the quotient obtained by dividing the Dollar amount of the sum of the GrossRoyalty, Net Royalty, Supplementary Royalty, and Additional Royalty which would have been payable in cashby the Project Owner with respect to the Month if the Province was not taking the Royalty Share in kind by theTransfer Price for the Project Owner for the Month.
22.8A Shrinkage
Where the Province takes in kind, all calculations made under this Article shall be made as if there hasbeen no shrinkage in transit incurred by the Project Owner whose Royalty Share is being taken in kind and theProject Owners shall not be required to assume the risk of, and royalty hereunder shall not be payable on, anyHibernia Blend lost due to shrinkage in transit.
22.9 Volume on Account of Recalculations, Interest and Arbitrations
The volume of Hibernia Blend to be taken in kind by the Province in respect of any amount payable by aProject Owner to the Province on account of:
(a) a recalculation of or redetermination made by the Province with respect to the Royalty Sharepayable by the Project Owner to the Province for a Month; or
(b) interest and Penalties payable by the Project Owner with respect to a Month; or
(C) an arbitration pursuant to this Agreement,
shall be the quotient obtained by dividing the Dollar amount payable by the Project Owner on such account bythe Transfer Price for the Project Owner for the Month to which the amount relates.
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The volume of Hibernia Blend which would otherwise be taken in kind by the Province on account of theRoyalty Share payable by a Project Owner shall be reduced by a volume which is the quotient obtained bydividing the Dollar amount payable by the Province on account of:
(a) a recalculation of or redetermination made by the Province with respect to the Royalty Sharepayable by the Project Owner to the Province for a Month; or
(b) interest payable by the Province with respect to a Month; or
(c) an arbitration pursuant to this Agreement,
by the Transfer Price for the Project Owner for the Month to which the amount relates.
22.10 Volume on Account of Annual Reconciliation
When the Province is taking the Royalty Share in kind and there is an amount due to the Province froma Project Owner pursuant to an Annual Reconciliation, the volume of Hibernia Blend to be taken in kind by theProvince on such account shall be the quotient obtained by dividing the Dollar amount payable by the ProjectOwner to the Province on account of the Annual Reconciliation by the volume weighted average Transfer Priceof the Project Owner for the Period to which the Annual Reconciliation relates. When the Province is taking theRoyalty Share in kind and there is an amount due to a Project Owner from the Province on account of anAnnual Reconciliation, then the volume of Hibernia Blend which would otherwise be taken in kind by theProvince from the Project Owner on account of the Royalty Share payable by the Project Owner shall bereduced by a volume which is the quotient obtained by dividing the Dollar amount payable by the Province tothe Project Owner on account of the Annual Reconciliation by the volume weighted average Transfer Price ofthe Project Owner for the Period to which the Annual Reconciliation relates.
22.11 Estimates
Each Project Owner from whom the Province is taking in kind the Royalty Share shall ten (10) BusinessDays prior to each Month provide to the Province a written estimate (referred in this Article as the “Estimate”)of the total volume of Hibernia Blend which the Province will be entitled to take in kind on account of theRoyalty Share for such Month. In the event that a Project Owner does not deliver to the Province an Estimateprior to the beginning of a Month, the Project Owner shall be deemed to have submitted to the Province anEstimate for the Month which is the same as the Estimate submitted by the Project Owner with respect to theimmediately preceding Month. In the event that the Province does not agree with any Estimate received ordeemed to have been received from a Project Owner, the Province may revise the Estimate on a good faithbasis and notify the Project Owner of the revised Estimate within five (5) Business Days of the receipt of theEstimate by the Province, and the Estimate shall be revised in accordance with the revised Estimate of theProvince.
22.12 Adjustment of Estimates
The Estimate for a Month shall take into account any discrepancies between Estimates for previousMonths and actual production, prices and costs.
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22.13 Accumulation of Royalty Taken in Kind
The amount of Hibernia Blend to be taken in kind by the Province on account of the Royalty Sharepayable by a Project Owner to the Province for a Month shall accumulate until actually delivered to theProvince pursuant to this Agreement or the Royalty Lifting Agreement, where such Royalty Lifting Agreementexists.
22.14 Deemed Payment for Certain Calculations
The volume of Hibernia Blend entitled to be taken in kind by the Province, as determined by thisArticle,shall be deemed, for the purposes only of the calculation of the amount of the Royalty Share payable by aProject Owner to the Province, to have been taken in kind by the Province as the entitlement of the Provincethereto arises under this Agreement. Where a Royalty Lifting Agreement exists, the Province acknowledgesthat operation of that agreement may delay the actual delivery of the Hibernia Blend to the Province. Thevolume of Hibernia Blend to be taken in kind by the Province on account of the Royalty Share as determinedfor each Month shall be accumulated and actually delivered to the Province in accordance with this Agreementor, where there is a Royalty Lifting Agreement, in accordance with that agreement. The inclusion in anycalculations of the Royalty Share of Hibernia Blend taken in kind by the Province which has not been actuallydelivered to the Province does not mean for any purposes of this Agreement that delivery of that amount ofHibernia Blend has been made to or foregone by the Province or that payment (by delivery of Hibemia Blend) ofthe Royalty Share to which such Hibernia Blend relates has been made to or foregone by the Province.
22.15 Unpaid Royalty Share
Each Project Owner acknowledges to and agrees with the Province that the Royalty Share which maybe taken in kind by the Province includes any amount which is due in money and unpaid by a Project Owner tothe Province at any time that the Province starts taking the Royalty Share in kind pursuant to this Article.
22.16 Supplementary Interest Provisions
For the purposes of clauses 25.3, 25.4 and 25.5, and further to the provisions of clause 24.6, when theProvince is taking the Royalty Share in kind in respect of a Project Owner, the Royalty Share and any amountrepresenting the value thereof shall not be regarded as due to the Province by the Project Owner until theProvince is entitled pursuant to this Agreement, or where a Royalty Lifting Agreement exists, pursuant to thatagreement, to receive the Royalty Share in kind. For the purposes of calculating the amount due to theProvince on account of interest and Penalties payable to the Province as a consequence of the Royalty Sharenot being delivered to the Province in kind when the Province was entitled to the delivery thereof pursuant tothis Agreement, and, where a Royalty Lifting Agreement exists, pursuant to that agreement, the amount due tothe Province in respect of which interest and Penalties shall be calculated shall be the product obtained bymultiplying the volume of Hibernia Blend that the Province was entitled to, but did not, receive in kind pursuantto this Agreement and, where a Royalty Lifting Agreement exists, pursuant to that agreement, by thecorresponding Transfer Price for the Project Owner for the Month in which delivery in kind to the Provinceshould have been made as aforesaid; provided, however, that interest and Penalties shall not be payable to theProvince by a Project Owner where the Royalty Share payable by the Project Owner in kind to the Province wasnot delivered in kind to the Province through no fault of the Project Owners or the Resource Project Operator.
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22.17 Cessation of Production
in the event that production of Hibernia Blend by the Project ceases by virtue of Project Suspension orProject Termination at a time when the Province is taking the Royalty Share in kind from a Project Owner andan amount deliverable to the Province in kind by the Project Owner on account of the Royalty Share hasaccumulated but not been delivered to the Province, then the Project Owner shall pay to the Province the valueof the accumulated but undelivered Royalty Share within thirty (30) days of the receipt from the Province ofnotice that such payment is required from the Project Owner. For the purposes of this clause, the amountpayable by a Project Owner on account of the value of the accumulated but undelivered Royalty Share shall bethe product obtained by multiplying the volume of Hibernia Blend which the Province is entitled to receive, buthas not received, in kind by the corresponding Transfer Price for the Project Owner for the last Month for whichthe Project Owner had a Transfer Price.
ARTICLE XXIII: This Article Intentionally Left Blank
ARTICLE XXIIIA: INITIAL CALCULATION RULES
23.IA Initial Balances
At the date hereof, the following terms shall be calculated for purposes of this Agreement as having aninitial and a cumulative balance of $0.00:
(i) Gross Transfer Revenue;
(ii) Resource Project Incidental Revenue-EL1093;
(iii) Resource Project Incidental Revenue-PLIOO5;
(iv) Resource Project Eligible Costs-EL1093;
(v) Resource Project Eligible Costs-PLIOO5;
(vi) Net Royalty Return Allowance;
(vii) Supplementary Royalty Return Allowance;
(viii) Resource Project Eligible Marketing Costs- EL1093;
(ix) Resource Project Eligible Marketing Costs- P11005;
(x) Gross Royalty paid;
(xi) Net Royalty paid; and
(xii) Additional Royalty paid.
ARTICLE XXIV: CALCULATION AND PAYMENT
24.1 Initial Determination and Calculation by the Project Owner
Gross Royalty, Net Royalty, Supplementary Royalty and Additional Royalty payable by a Project Ownerto the Province shall initially be calculated by the Project Owner making such determinations and allocations inaccordance with the provisions of this Agreement and the Allocation Agreement.
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24.IA Production Allocation to Royalty Area
Hibernia Blend determined, Pursuant to Article 17 of the Allocation Agreement, for each Project Ownerfor each Month of a Period to be production from the EL1093/PLIOO5 Royalty Area shall be that ProjectOwner’s production of Hibernia Crude EL1093/PLIOO5 for such Month for purposes of this Agreement.
24.IB EL1093/PL.1005 Royalty Area Sales Volume
Hibernia Blend determined, pursuant to Article 21 of the Allocation Agreement, for each Project Ownerfor each Month of a Period to be the sales volume from the EL1093/PLIOO5 Royalty Area shall be that ProjectOwner’s sales volume of Hibernia Crude EL1093/PLIOO5 for such Month for purposes of this Agreement.
24.2 Remittance
Gross Royalty, Net Royalty, Supplementary Royalty and Additional Royalty payable by a Project Ownershall be remitted by the Project Owner on the basis of the initial calculation made by the Project Ownerpursuant to clause 24.1.
24.3 Redetermination and Recalculation by Province
The Province shall have the right to redetermine any determination or allocation made by or on behalfof a Project Owner pursuant to this Agreement for the purposes of any calculations pursuant to this Agreementand the right to redetermine any determination or allocation made by or on behalf of a Project Owner pursuantto the Allocation Agreement for the purposes of any calculation pursuant to this Agreement and to recalculateany amount and any calculation or component of any calculation made by or on behalf of a Project Owner orthe Project Owners in respect of Pre-Development Costs, Resource Project Eligible Costs, EligibleTransportation Costs, Resource Project Eligible Marketing Costs, Gross Royalty, Net Royalty, SupplementaryRoyalty or Additional Royalty. Any such redetermination or recalculation by the Province pursuant to thisAgreement shall be in accordance with the provisions of this Agreement and the Allocation Agreement andshall be made and notice thereof given to each Project Owner affected thereby before, and not after, the end ofthe Period following the Period in which the Audit Period ends with respect to the relevant determination,allocation or calculation.
Where the Province redetermines or recalculates an allocation made by or on behalf of a Project Owneror the Project Owners in respect of a production volume, sales volume, cost or revenue pursuant to theAllocation Agreement, the Province agrees to use such redetermined or recalculated allocation for thepurposes of (i) any recalculation of any amount and any calculation or component of any calculation made byor on behalf of a Project Owner or the Project Owners in respect of Pre-Development Costs, Resource ProjectEligible Costs, Eligible Transportation Costs, Resource Project Eligible Marketing Costs, Gross Royalty, NetRoyalty, Supplementary Royalty or Additional Royalty pursuant to this Agreement, and (ii) any recalculation ofany amount and any calculation or component of any calculation made by or on behalf of a Project Owner orthe Project Owners in respect of Resource Project Eligible Costs, Eligible Transportation Costs, Resource ProjectEligible Marketing Costs, Gross Royalty, Net Royalty, Supplementary Royalty, AA Blocks Additional Royalty orSouthern Additional Royalty (as all such terms are defined in the PLIOOI Hibernia Royalty Agreement)pursuant to the PLIOOI Hibernia Royalty Agreement.
Any determination, allocation or calculation made by or on behalf of a Project Owner pursuant to thisAgreement or the Allocation Agreement in respect of Eligible Transportation Costs which is not in accordancewith the provisions of this Agreement or the Allocation Agreement may be disallowed by the Province withoutany requirement on the Province to provide an alternate determination, allocation or calculation.
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24.4 Payment Upon Redetermination or Recalculation
Any amount payable by a Project Owner or the Province as a result of a recalculation orredetermination by the Province in respect of the amount of Gross Royalty, Net Royalty, Supplementary Royaltyor Additional Royalty payable pursuant to this Agreement shall be paid, in money, by whichever of the ProjectOwner or the Province is obliged to make the payment, before the end of the Month following the Month inwhich the recalculation or redetermination is made and written notice thereof is given by the Province to theProject Owner. In the event that any amount payable pursuant to this clause is payable at a time when theProvince is taking the Royalty Share from a Project Owner in kind, then the amount which the Province wouldotherwise be entitled to take in kind pursuant to the other provisions of this Agreement shall be adjustedpursuant to clause 22.9.
24.5 Arbitration
After payment by a Project Owner of the amount, if any, payable by the Project Owner as a result of arecalculation or redetermination made by the Province in respect of Pre-Development Costs, Resource ProjectEligible Costs, Eligible Transportation Costs, Resource Project Eligible Marketing Costs, Gross Royalty, NetRoyalty, Supplementary Royalty or Additional Royalty, plus interest and Penalties, if any, payable on suchamount in accordance with the provisions of this Agreement, the Project Owner may submit any disagreementthat the Project Owner has with any recalculation or redetermination made by the Province to arbitration, atany time before, but not after, the end of the second Period following the Period in which the Project Ownerreceived notice from the Province of the recalculation or redetermination with which the Project Ownerdisagrees. An amount of Pre-Development Costs, Resource Project Eligible Costs, Eligible Transportation Costs,Resource Project Eligible Marketing Costs, Gross Royalty, Net Royalty, Supplementary Royalty or AdditionalRoyalty as the case may be, determined by arbitrators shall be the amount thereof for all purposes of thisAgreement. In the event that any amount payable pursuant to this clause is payable at a time when theProvince is taking the Royalty Share from a Project Owner in kind, then the amount which the Province wouldotherwise be entitled to take in kind pursuant to the other provisions of this Agreement shall be adjustedpursuant to clause 22.9.
24.6 Time and Manner of Payment
Except as otherwise expressly provided for herein, the Royalty Share payable by each Project Owner tothe Province shall be paid in money or in kind, at the option of the Province, as provided for in this Agreement.If payable in money, payment shall be made in Dollars and, unless express provision otherwise is made herein,is due on the last day of the Month following the Month to which the payment relates. If payable in kind,delivery shall be made in accordance with Article XXII. Absent consent in writing from the Province, all amountspayable to the Province in money pursuant to this Agreement shall either be paid by cheque payable at par anddrawn on an account at a branch within Canada of a Canadian chartered bank or shall be effected by a cashtransfer at par from a Canadian chartered bank.
24.7 Annual Reconciliation and Adjustment
Within one hundred and twenty (120) days of the end of each Period, each Project Owner shall prepareand deliver to the Province a reconciliation of the Gross Royalty, Net Royalty, Supplementary Royalty andAdditional Royalty payable by the Project Owner with respect to the preceding Period. Such reconciliation shallbe accompanied by a certificate of the Project Owner signed on its behalf by an Officer of the Project Ownercertifying that calculations by the Project Owner are accurate and comply with the requirements of thisAgreement. Subject to the other provisions of this Article, within thirty (30) days of the receipt by the Provinceof such reconciliation, the adjustment provided for in the reconciliation shall be made in money. In the eventthat any amount payable pursuant to this clause is payable at a time when the Province is taIckg the Royalty
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Share from a Project Owner in kind, then the amount which the Province would otherwise be entitled to take inkind pursuant to the other provisions of this Agreement shall be adjusted pursuant to clause 22.10.
24.8 Inventory
In the event that the share of a Project Owner of Hibernia Crude ELIO93/PLIOO5 and transferred by orto the account of the Project Owner at the Loading Point into marine tankers does not reach the Sale Pointwithin sixty (60) days of the end of the Month in which such transfer was made (in this clause referred to as the“Inventory Volume”) then, for the purposes of determining the amount of the Royalty Share payable withrespect to the Hibernia Crude EL1093/PLIOO5 so transferred, the Gross Transfer Revenue for such HiberniaCrude ELIO93/PLIOO5 shall initially be the product obtained by multiplying that Project Owner’s most recentTransfer Price by the Inventory Volume. Upon any Hibernia Crude EL1093/PLIOO5 for which Gross TransferRevenue is determined by operation of this clause reaching the Sale Point, then the Royalty Share relative tosuch Hibernia Crude EL1093/PLIOO5 shall be recalculated using the Sale Price for the Hibernia CrudeEL1093/PLIOO5 as otherwise provided for in this Agreement and accounts between the Project Owner and theProvince shall be adjusted by credit to whoever is entitled thereto. For the purposes of this Agreement,Hibernia Crude EL1093/PLIOO5 transferred at the Loading Point by or to the account of a Project Owner shallbe deemed to be sold by the Project Owner on a “first in, first out” basis.
24.9 NoSet-Offs
Gross Royalty, Net Royalty, Supplementary Royalty, Additional Royalty, interest and Penalties payableto the Province pursuant to this Agreement shall not be subject to set-off of any kind other than adjustmentsprovided for in this Agreement.
24.10 Non-Arm’s Length Allowance
Notwithstanding any other provision of this Agreement, the Province may by written notice to a ProjectOwner accept as being at Arm’s Length any transaction or amount which would not so qualify because it wasotherwise not at Arm’s Length.
24.11 Non-Arm’s Length Notice
Whenever a Project Owner makes a determination that a transaction or circumstance which, in eithercase, involves a cost to the Project Owner is not at Arm’s Length pursuant to the provisions of this Agreement,the Project Owner having made the determination shall provide to the Province with its next Monthly Summarya description of why the transaction or circumstance is not at Arm’s Length. Thereafter the Project Owner shallprovide to the Province such information as the Province may reasonably request with respect to thetransaction or circumstance.
24.12 Arm’s Length Threshold
Transactions resulting in Pre-Development Costs, Resource Project Eligible Costs or Resource ProjectEligible Marketing Costs which otherwise would not be at Arm’s Length shall be deemed to be at Arm’s Lengthwhere:
(i) the cost in a single transaction does not exceed One Hundred Thousand Dollars ($100,000.00) and thecumulative costs in all transactions with the same Person or Affiliates of that Person duringthe Perioddo not exceed Two Million Dollars ($2,000,000.00); or
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(ii) the lowest bid in a bona fide competitive bid situation is accepted where there are one or more bonatide bids by Persons who are at Arm’s Length with all Project Owners and Affiliates of the ProjectOwners.
Each amount set forth in item (I) of this clause shall increase or decrease on the first day of each calendar yearsince September 1, 1990, by an amount proportionate to the amount of the increase or decrease, respectively,in the Supplementary Royalty Index for the Month of July of the second preceding calendar year to the Month ofJuly of the immediately preceding calendar year.
24.13 Application of Receipts
Payments received by the Province for the account of a Project Owner in respect of its Royalty Shareshall be applied by the Province:
(i) first, to pay any Penalties payable by the Project Owner pursuant to this Agreement;
(ii) second, to pay any interest payable by the Project Owner pursuant to this Agreement; and
(iii) third, to pay any Gross Royalty, Net Royalty, Supplementary Royalty or Additional Royalty payable bythe Project Owner pursuant to this Agreement.
24.14 Advice Re: Events
The Project Owners shall give, or shall cause to be given, to the Province notice of Production Start-Up,Force Majeure, Project Suspension and Project Termination and of the end of a period of Force Majeure or ofProject Suspension. A Project Owner shall give notice to the Province of Project Withdrawal by the ProjectOwner. The notice given to the Province pursuant to this clause with respect to the occurrence of ForceMajeure or of Project Suspension shall include a good faith estimate of the length of time that the period ofForce Majeure or of Project Suspension is expected to last. The provision of any such estimate to the Provincepursuant to this clause shall:
(I) be for informational purposes of the Province only;
(ii) not require or obligate the Project Owner to incur any expenses to effect same; and
(iii) be treated as confidential information of the Project Owner,
and the Project Owners shall not in any manner be liable or responsible for the accuracy of the estimate or anyother information contained therein.
ARTICLE XXV: INTEREST AND PENALTIES
25.1 Interest Payable by Province: Generally
Interest at a per annum rate equal to the Prime Rate, compounded and paid Monthly, shall be paid bythe Province in respect of all amounts payable by the Province pursuant to this Agreement from the datepayment by the Province of the amount was due until the date of receipt by the Project Owner of the ActualCash Payment.
25.2 Interest Payable by Province: Arbitration Awards
Notwithstanding the provisions of clause 25.1, in the event that an arbitration pursuant to thisAgreement determines that, as a result of a recalculation or redetermination by the Province, a Project Ownerhas overpaid royalty to the Province pursuant to this Agreement, then interest at a per annum rate equal to thePrime Rate, compounded and paid Monthly, shall be paid by the Province in respect to the amouIit of royalty
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determined by the arbitration to have been overpaid by the Project Owner to the Province from the date of theoverpayment until the date of receipt by the Project Owner of the Actual Cash Payment.
25.3 Interest Payable to Province: Generally
Interest at a per annum rate equal to the sum of the Prime Rate plus six per cent (6%), compoundedand paid Monthly, shall be paid to the Province in respect of all amounts due to the Province pursuant to thisAgreement from the date payment of the amount was due until receipt by the Province.
26.4 Interest Payable: Annual Adjustments
Notwithstanding the provisions of clause 25.3, in the event that it is determined on the basis of areconciliation pursuant to clause 24.7 that a Project Owner has underpaid by less than ten per cent (10%) theGross Royalty, Net Royalty, Supplementary Royalty and Additional Royalty payable to the Province in respect ofa Month, then interest on the amount underpaid shall be paid to the Province by the Project Owner at a perannum rate equal to the Prime Rate, compounded and paid Monthly, from the end of the Month following theMonth to which the underpayment relates to the date that payment thereof is due in accordance with clause24.7. Thereafter until payment, interest on the amount underpaid shall be paid to the Province by the ProjectOwner at the rate and compounded and paid as provided for in clause 25.3. In the event that theunderpayment aforesaid is ten per cent (10%) or greater, interest on the amount underpaid shall be paid to theProvince by the Project Owner as provided in clause 25.3. Interest shall be payable by the Province at a perannum rate equal to the Prime Rate, compounded and paid Monthly on any amounts payable to a ProjectOwner as a result of an annual reconciliation pursuant to clause 24.7 from the end of the Month following theMonth to which the overpayment relates to the date that the overpayment is received by the Project Ownerfrom the Province.
25.5 Penalty on Nonpayments
Notwithstanding the provisions of clause 25.3, in the event that a Project Owner either does not pay, orunderpays when due, the amount payable to the Province as indicated by a Monthly Summary or AnnualReconciliation, then the amount not paid or underpaid shall, upon notice by the Province to the Project Ownerand commencing on the fifteenth (15th) day following receipt by the Project Owner of such notice, bearinterest, in lieu of interest as provided in clause 25.3, at a per annum rate equal to twice the rate set forth inclause 25.3 to a maximum of twenty-four per cent (24%) per annum, compounded and paid Monthly, untilpaid.
25.6 Audit Upon Nonfiling
In the event that a Project Owner does not file with the Province a Monthly Summary or an AnnualReconciliation within the time provided therefor herein, then the Province may give the Project Owner notice ofsuch failure to file. In the event that a Project Owner does not within fifteen (15) days of the receipt of suchnotice file the Monthly Summary or Annual Reconciliation to which the notice relates, then the Province mayconduct such audit of the records of the applicable Project Owner and Resource Project Operator as isnecessary to prepare the Monthly Summary or Annual Reconciliation to which the notice related and the costof the audit shall be added to the amount, if any, determined by the Province to be owing by the Project Ownerto the Province. Upon completion of an audit by the Province and notification of the Project Owner of theamount payable by the Project Owner to the Province, the Project Owner shall forthwith pay to the Province anyamount so determined by the Province to be payable by the Project Owner to the Province under thisAgreement. Any amount determined by the Province to be payable by a Project Owner to the Province pursuantto the operation of this clause shall bear interest and shall be liable to Penalty as provided for in this Article.
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25.7 Occurrence of Material Default
A “Material Default” by a Project Owner shall have occurred upon:
(I) non-payment by the Project Owner of Gross Royalty, Net Royalty, Supplementary Royalty or AdditionalRoyalty within one hundred and eighty (180) days after written notice to each of the Project Ownersand each of the Project Lenders of the Project Owner of the unpaid Gross Royalty, Net Royalty,Supplementary Royalty or Additional Royalty;
(ii) failure of the Project Owner to deliver the Royalty Share to the Province in kind in accordance with theprovisions of ARTICLE XXII within ninety (90) days after written notice by the Province to each of theProject Owners, and to each of the Project Lenders of the Project Owner, that the Royalty Share wasnot delivered to the Province; provided that in the original instance and in any subsequent instancesthe Province was ready, willing and able to take in kind at the Loading Point and the Province was incompliance with those provisions of this Agreement and ARTICLE XXII;
(iii) failure of the Project Owner to deliver to the Province material information necessary for thecalculation of royalties, as specified in this Agreement or the Allocation Agreement, within one hundredand eighty (180) days after written notice to each of the Project Owners, and each of the ProjectLenders of the Project Owner, of the original failure to deliver such material information; or
(iv) failure of the Project Owner to comply with the provisions of either clauses 16.8(a)(ii) or 16.9(a)(i i) or ifthe Project Owner shall have novated a “Person” referred to in clause 3(b) of Schedule D into theELlO93JOAorthe PLIOO5JOA, asthecase may be, withoutsuch Person havingcontemporaneouslyentered into the agreement referred to in clause 3(b) of Schedule D.
The ninety (90) day period referred to in item (i) of this clause shall be extended by a period equal to:
(1) any period of Force Majeure which commences within the ninety (90) day period; and
(2) a reasonable period to allow the Province to arrange for marine tankers to accept delivery ofthe Royalty Share in kind.
In the event of the occurrence of any of the events described in items (i), (ii)(i) and (iii) it is agreed that any suchevent may be remedied by any Person in full satisfaction of the obligation to which the event relates.
25.8 Termination of Agreement
The Province may terminate this Agreement with respect to a Project Owner upon the occurrence ofeither the following events and only upon the occurrence of either of the following events:
(I) Material Default by the Project Owner; or
(ii) the circumstances provided for in clause 7.2,
by written notice to all Project Owners and all Project Lenders of the Project Owner.
25.9 Notice to Project Lenders
The Province shall have satisfied the requirements of giving a Project Lender notice pursuant to clauses25.7 and 25.8 if notice is sent by prepaid registered mail to the last address for that Project Lender notified tothe Province by the Project Lender in accordance with the provisions of Schedule “D.
25.10 Reimbursement of CertaIn Costs
A Project Owner failing to deliver the Royalty Share to the Province in kind shall pay to the Province theamount of all direct costs incurred by the Province as a result of such failure. —. J)/)
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25.11 Artificial Transactions
If the result of one or more acts, agreements, arrangements, transactions or operations is toartificially reduce the Royalty Share or the value thereof to the Province, then the Royalty Share or valuethereof shall be calculated as if the act, agreement, arrangement, transaction or operation had not takenplace. If a Project Owner disagrees with a calculation and the disagreement is not resolved by discussions withthe Province, the calculation may be submitted to arbitration in order to determine the extent, if any, by whichthe Royalty Share or value thereof has been artificially reduced by the act, arrangement, transaction oroperation and the Royalty Share or value thereof will be adjusted accordingly. This clause shall apply only indetermining the qualification of a cost as a Resource Project Eligible Cost and the extent to which a cost soqualifies.
25.12 No Interest or Penalties While Royalty Share To Be Taken In Kind Accumulates
Notwithstanding the other provisions of this Article, no interest or Penalties shall be payable by aProject Owner in respect of a Royalty Share to be taken in kind by the Province while the amount of HiberniaBlend to be taken in kind on account of that Royalty Share is accumulating until the Hibernia Blend to be takenin kind by the Province on account of that Royalty Share is deliverable to the Province pursuant to ARTICLEXXII.
25.13 Nominal Rate Method of Interest Calculation
For all purposes relating to the calculation and payment of interest pursuant to this Agreement, thenominal rate method of interest calculation shall apply.
ARTICLE XXVI: RECORDS AND AUDIT
26.1 Accounts of the Resource Project Operators
(I) EL1093
The EL1093 Project Owners shall cause the Resource Project Operator-EL1093 to maintain inNewfoundland and Labrador the Joint Account-EL1093. The EL1093 Project Owners shall cause theResource Project Operator-EL1093, on behalf of the EL1093 Project Owners, to determine andmaintain in Newfoundland and Labrador separate accounts recording all Pre-Development Costs,Resource Project Eligible Costs-EL1093 and Resource Project Incidental Revenue-EL1093.
(ii) P11005
The PLIOO5 Project Owners shall cause the Resource Project Operator-PLIOO5 to maintain inNewfoundland and Labrador the Joint Account-PLIOO5. The PL1005 Project Owners shall cause theResource Project Operator-PL1005, on behalf of the PLIOO5 Project Owners, to determine andmaintain in Newfoundland and Labrador separate accounts recording all Pre-Development Costs,Resource Project Eligible Costs-PLIOO5 and Resource Project Incidental RevenuePL1OO5.
26.2 Project Owner’s Accounts
Each Project Owner shall separately maintain in Canada all accounts necessary to determine theoccurrence of Net Royalty Payout and Supplementary Royalty Payout for the Project Owner except thoseaccounts to be maintained by the applicable Resource Project Operator pursuant to clause 26.1. Each ProjectOwner shall separately maintain in Canada accounts regarding all Resource Project Eligible Marketing Costsincurred by the Project Owner. Each Project Owner shall maintain in Canada such accounting, financial and anyother reporting systems as are necessary for the purposes of this Agreement. In the event that the auditors of
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the Province are denied initial access by a Project Owner to the accounts maintained in Canada outside ofNewfoundland and Labrador pursuant to this Agreement, then the Project Owner agrees that if, after notice inwriting by the Province to the Project Owner of such denial of initial access, the Project Owner thereafter deniesaccess to the auditors of the Province, such accounts shall upon notice from the Province be maintained inNewfoundland and Labrador.
26.3 Annual Information
Each Project Owner shall provide or cause the Resource Project Operator-EL1093 or the ResourceProject Operator-PL1005, as the case may be, to provide to the Province in the form prescribed by the Provinceafter consultation with the EL1093 Project Owners or the PLIOO5 Project Owners, as the case may be, notlater than one hundred and twenty (120) days after the end of each Period, the following information:
(i) Costs that have been included in (a) Pre-Development Costs, (b) Resource Project Eligible CostsEL1093 or Resource Project Eligible Costs-PLIOO5, as the case may be, (c) Eligible TransportationCosts Deduction-EL1093/PLIOO5 and (d) Resource Project Eligible Marketing Costs-EL1093 orResource Project Eligible Marketing Costs-PL1005, as the case may be;
(ii) Volumes, prices, allocations and revenues used in determination of (a) Gross Transfer Revenue, (b) NetTransfer Revenue, (c) Resource Project Incidental Revenue-EL1093 or Resource Project IncidentalRevenue-PLIOO5, as the case may be, and (d) Eligible Transportation Costs;
(iii) Volume of Hibernia Crude EL1093/PL1005 transferred at the Loading Point by the Project Owner;
(iv) The calculation of the Gross Royalty, Net Royalty, Supplementary Royalty and Additional Royaltypayable pursuant hereto;
(v) Information necessary to determine the Supplementary Royalty Return Allowance Factor;
(vi) A certificate or certificates of the applicable Resource Project Operator signed by an Officer of theapplicable Resource Project Operator certifying that the information supplied by each is accurate, andthat all calculations comply with the provisions of this Agreement;
(vii) A certificate of the Project Owner signed by an Officer of the Project Owner certifying that theinformation supplied by it is accurate and that all calculations comply with the provisions of thisAgreement;
(viii) The financial statements and audit letter of the applicable Resource Project Operator with respect tothe fiscal year ended in the Period; and
(ix) Such other information as the Province may reasonably request for purposes of this Agreement.
The information provided pursuant to this clause at the end of the first Period following the date of thisAgreement shall include the information required by this clause with respect to each Period, or part thereof,from the date of this Agreement to the end of the first Period following the date of this Agreement.
26.4 Monthly Summary
Prior to, and until, the commencement of production of Hibernia Crude EL1093/PLIOO5, each ProjectOwner shall submit, or cause to be submitted, to the Province before the end of each Month a summarystatement, in the form prescribed by the Province after consultation with the Project Owners, of all (a) PreDevelopment Costs, (b) Resource Project Eligible Costs-ELIO93 or Resource Project Eligible Costs-PL1005, asthe case may be and (C) Resource Project Eligible Marketing Costs-EL1093 or Resource Project EligibleMarketing Costs-PLIOO5, as the case may be, paid during the preceding Month. Upon commencement ofproduction of Hibernia Crude EL1093/PLIOO5, the remittance of Gross Royalty, Net Royalty, Supplementary )Royalty and Additional Royalty payable each Month by a Project Owner shall be accompanied bya summary9
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statement, in the form prescribed by the Province after consultation with the Project Owners, of theinformation reasonably required by the Province upon which the Gross Royalty, Net Royalty, SupplementaryRoyalty and Additional Royalty payable was based and calculated. In any event, a Project Owner shall not berequired to provide any detailed pricing related information other than the estimated landed price at the SalePoint of two widely-traded reference Crude Oils, quality adjusted for Hibernia Crude EL1093/PLIOO5.
26.5 Translation of Currency
Any amounts received or paid by a Resource Project Operator or a Project Owner relating to theResource Projects in other than Canadian Dollars shall be converted into Canadian Dollars when received orpaid, as the case may be, in accordance with Canadian generally accepted accounting principles or inaccordance with any agreement amongst the Project Owners and the Province that may be made in thatregard.
26.6 Audits and Inspections
The Province shall have the right from time to time to inspect or audit all books, records and accountsand any document, as well as the right to inspect inventories and assets of any Project Owner and anyResource Project Operator as may be necessary or required to verify the production, delivery, disposition, saleprices and terms of sale of Hibernia Crude EL1093/PLIOO5 and costs and revenues of the Resource Project,and Resource Project Eligible Marketing Costs. The Province shall, upon reasonable notice and for theaforementioned purposes, have the right to enter, during normal business hours, upon any premises or placewhere the business of the Resource Projects, the Resource Project Operators or a Project Owner is carried onor where any such records, books, documents, inventories or assets are maintained, except that the Provincemay conduct cash and inventory audits of any Resource Project Operator without notice. A Project Owner shallbe allowed a reasonable period of time to produce documents requested by the Province in the course of anaudit. Requests for documents on behalf of the Province shall be in sufficient detail for the Project Owner toidentify the documents requested. The Project Owners shall cooperate and cause the applicable ResourceProject Operator to cooperate in any audits and inspections permitted by this Agreement. Audits undertaken bythe Province shall be conducted within the Audit Period. Subject to clause 25.6, the cost of audits performed bythe Province or its authorized agent shall be at the sole cost of the Province.
26.7 This Clause Intentionally Left Blank
26.8 PreservatIon of Records
Each Project Owner shall, and shall cause each applicable Resource Project Operator to, maintain andpreserve each document necessary for the purposes of this Agreement until the end of the Audit Periodapplicable to such document.
26.9 Access and Seizure
Where the Province has reasonable grounds for believing that a Project Owner is not providing or is notcausing to be provided information or access in accordance with the requirements of this Agreement, theProject Owners agree that the Province may upon an order of the Trial Division of the Supreme Court ofNewfoundland and Labrador or a Justice thereof granted upon ex parte application by the Province:
(a) enter at all reasonable times into any place where there is conducted the business of the applicableResource Project Operator or a Project Owner required to keep records under this Agreement; 11
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(b) examine or seize and take away any record of the applicable Resource Project Operator or a ProjectOwner required to be kept under this Agreement;
(c) examine or seize and take away any record which will assist in determining the accuracy of thecalculations to be made pursuant to and the records that are required to be kept under this Agreement;and
(d) require the applicable Resource Project Operator or a Project Owner to give the Province or personauthorized by the Province all reasonable assistance in carrying out the functions under this clause.
The Province shall forthwith provide a detailed list of all documents seized by the Province to the Person fromwhom the documents were seized. The Province shall allow access to all and any documents seized by theProvince to the representatives of the Project Owner with respect to whom the documents were seized. Anyreproduction of seized documents shall be at the expense of whomsoever does the reproduction. The Provinceshall return all original documents to the Person from whom the documents were seized as soon as copieshave been made and certified and no later than thirty (30) days from the date of seizure.
26.10 Certified Copies
The Parties hereto agree that, notwithstanding any rule of law or evidence to the contrary, any such rulebeing hereby waived to the fullest extent that it may effectively be done, by all Parties hereto, a photocopy orother copy of a document seized by the Province from a Resource Project Operator or a Project Owner andpurporting to be certified by the person authorized by the Province to be responsible for the seized documentsas a copy of the document seized shall be admissible in evidence in any arbitration, administrative or judicialproceeding and shall be, in the absence of evidence to the contrary, proof of the contents of the documentwithout proof of the certifying person’s signature or appointment or of his responsibility for custody of thedocument.
26.11 Legislative and Regulatory Action
The Province may take such legislative and regulatory action as the Province considers appropriate toimplement the provisions of clauses 26.9 and 26.10 and to allow the provisions of clauses 26.9 and 26.10 tobe enforced by the Supreme Court of Newfoundland and Labrador upon ox parte application by the Province.
26.12 Rights in Other Jurisdictions
The Province shall have the same rights with respect to records, access to premises, examination andseizure in jurisdictions other than the Province as it has under clause 26.9. Each Project Owner hereby waivesall notice to it and its counsel of and consents to any application being made ex parte by the Province in thecourts of any jurisdiction to enforce in such jurisdiction the rights that it would have were proceedings takenwith respect to the Province under clause 26.9.
26.13 Non-Availability of Records
In the event that documents which the Project Owner or a Resource Project Operator are required tomake available to the Province cannot be made available to the Province because the documents have beenvalidly seized by another Person, the failure to make such documents available to the Province shall notconstitute a breach of or default under this Agreement by the Project Owner or a breach of or default under theundertakings given by the applicable Resource Project Operator, pursuant to clause 10.4. Each Project Ownershall, and shall cause the applicable Resource Project Operator to, use all reasonable efforts to assist theProvince in gaining access to any document seized by another Person while in the possession çf the other \&Person. A 1W
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26.14 Confidentiality
Subject to the requirements of the Access to Information and Protection of Privacy Act, the Provinceshalt at all times keep confidential all information obtained from a Resource Project Operator, any ProjectOwner or any Licensee. These confidentiality requirements shall not apply to any information providedpursuant to this Agreement which:
(a) is required to be produced in court or pursuant to an arbitration hereunder to enforce the provisions ofthis Agreement;
(b) is in the public domain at the time it is obtained by the Province through no wrongful act of theProvince;
(c) becomes in the public domain after it has been obtained through no fault of the Province;
(d) is otherwise in the possession of the Province prior to the time it is obtained from the Project Owner,Licensee or Resource Project Operator through no wrongful act of the Province and is not then held inconfidence;
(e) relates to a Resource Project and is obtained by the Province from any Person not known to theProvince to be obligated to keep the information obtained by the Province confidential;
(f) the Province is required to disclose by law, by any court having jurisdiction or by any body constitutedby law which has been authorized by law to require such disclosure, but in each case only to the extentso requested and required; or
() is disclosed to Canada.
Notwithstanding the foregoing, the Province may disclose, upon the same conditions as are applicable to theProvince under this clause, any information obtained from a Resource Project Operator, any Project Owner orany Licensee to any servant of and advisor to the Province for the purposes only of this Agreement providedthat, with respect to any information relating to the pricing of Crude Oil or relating to contracts for the sale ofHibernia Crude EL1093/PLIOO5 of a Project Owner, such information and contracts may only be disclosed forthe purposes of items (a) or (f) or for the purposes of administering this Agreement. The Province shall keepconfidential pursuant to the provisions of this clause all information received from Canada relative to theResource Project that Canada advises the Province it received from a Project Owner, a Licensee or a ResourceProject Operator to the same extent as if the Province had received that information from such Project Owner,Licensee or Resource Project Operator. The Province shall use all reasonable efforts to claim that Canada keepconfidential on the terms provided for in this clause, but subject to the freedom of information laws applicableto Canada, all information which the Province is obligated to keep confidential by the provisions of this clause,excepting item (g) of this clause, and which the Province disclosed to Canada pursuant to item (g) of thisclause.
26.15 Environmental Insurance Policies
Each Project Owner shall provide, or cause to be provided, to the Province, for information purposesonly, a copy,certified bythe policyissuer,of each policyof insurancewith respecttoa Resource Projectwhichbenefits the Project Owner or the applicable Resource Project Operator with respect to damage caused as aresult of oil-spills, blow-outs or other similar events and a copy, certified by the policy issuer, of each change,amendment, renewal and cancellation of each such policy.
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ARTICLE XXVII: ARBiTRATION
27.1 Submission to Arbitration
The provisions of Schedule G to the Allocation Agreement shall apply to any disagreement among theParties hereto as regards any matter expressly allowed in this Agreement to be submitted to arbitration.
PART IV: COSTS
ARTICLE XXVIII: PRE-DEVELOPMENT COSTS
28.1 Amount
For purposes of calculation of Pre-Development Costs, the following costs shall be included in suchcalculation:
(i) for costs incurred prior to July 1, 2009, the amount so allocated to PLIOO5 and EL1093 pursuant toclause 18.8(a) of the Allocation Agreement; and
(Ii) for costs Incurred after July 1, 2009 and prior to Sanction, such costs;
(a) as are allocated to PLIOO5 and EL1093 pursuant to clause 18.8(c) of the AllocationAgreement; and
(b) which meet the eligibility rules set out in clause 29.1(i)(a), (b) and (C) or 29.1(ii)(a), (b) and (c)and are not disqualified pursuant to clause 29.3 under this Agreement.
Pre-Development Costs calculated pursuant to clause 28.1 shall not be eligible for uplifts under thisAgreement.
ARTICLE XXIX: RESOURCE PROJECT ELIGIBLE COSTS
29.1 Qualification of Resource Project Eligible Costs
(I) EL1093
A cost qualifies as a Resource Project Eligible Cost—EL1093 to the extent that it is an Actual CashPayment and satisfies each of the following requirements:
(a) it is directly attributable to the Resource Project-EL1093 (which Resource Project-EL1093includes that portion of the Unit Project attributed to EL1093 pursuant to the AllocationAgreement);
(b) it is reasonable in relation to the circumstances under which it is incurred;
(c) it: (i) is charged to the Joint Account-EL1093 or to the provisions which replace the JointAccount-EL1093 pursuant to clause 15.2; or (ii) is charged to the Unit Account and allocated toEL1093 pursuant to the Allocation Agreement;
(d) it is incurred after the date of this Agreement; and
(e) it has not been claimed as a Pre-Development Cost.
(ii) PLIOO5
A cost qualifies as a Resource Project Eligible Cost-PLIOO5 to the extent that it is an Actual CashPayment and satisfies each of the following requirements:
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(a) it is directly attributable to the Resource Project-PLIOO5 (which Resource Project-PLIOO5includes that portion of the Unit Project attributed to P11005 pursuant to the AllocationAgreement);
(b) it is reasonable in relation to the circumstances under which it is incurred;
(c) it: (i) is charged to the Joint Account- PLIOO5 or to the provisions which replace the JointAccount-PLIOO5 pursuant to clause 15.2; or (ii) is charged to the Unit Account and allocated toPLIOO5 pursuant to the Allocation Agreement;
(d) it is incurred after the date of this Agreement; and
(e) it has not been claimed as a Pre-Development Cost.
29.2 Qualification of Resource Project Eligible Marketing Costs
The Province acknowledges the possibility that each Project Owner may need to establish and staff anoffice within the Province to market the Project Owner’s share of Hibernia Crude ELIO93/PLIOO5 and, further,the Province acknowledges that the Project Owner may incur costs on account thereof. A cost qualifies as aResource Project Eligible Marketing Cost of a Project Owner to the extent that it is an Actual Cash Payment andsatisfies each of the following requirements:
(a) it is directly attributable to the personnel of the Project Owner which the Project Owner will locatewithin the Province for the purpose of marketing that Project Owner’s share of Hibemia CrudeE11093/PLIOO5;
(b) it is reasonable in relation to the circumstances under which it is incurred; and
(c) it is incurred after the date of this Agreement.
Whenever an asset of a Project Owner, the cost of which when acquired was claimed as a Resource ProjectEligible Marketing Cost, is disposed of or is used for purposes not directly related to marketing the ProjectOwner’s share of Hibernia Crude EL1093/PLIOO5, the greater of the price or the fair market value of suchasset or use shall reduce the Resource Project Eligible Marketing Costs of the Project Owner in the Period ofsuch sale or use and any negative amount of Resource Project Eligible Marketing Costs thus created shall becarried forward to the following Period and reduce Resource Project Eligible Marketing Costs in the followingPeriod.
29.3 Disqualification
Notwithstanding clauses 29.1 and 29.2 and subject to clause 29.5, a cost will not qualify as a ResourceProject Eligible Cost or a Resource Project Eligible Marketing Cost if it is one of the following:
(a) respecting EL1093, overhead of the EL1093 Project Owner or of anyone not dealing at Arm’s Lengthwith the ELIO93 Project Owner or the Resource Project Operator-EL1093, except for:
(1) overhead of the Resource Project Operator-EL1093 incurred in respect of its office located inthe Province or a person working in the Province; and
(2) overhead included in the charges to the Joint Account-E11093 of Affiliates of an EL1093Project Owner and which charges have been approved in writing by the Province;
(b) respecting P11005, overhead of the PLIOO5 Project Owner or of anyone not dealing at Arm’s Lengthwith the P11005 Project Owner or the Resource Project Operator-PLIOO5, except for:
(1) overhead of the Resource Project Operator-PLIOO5 incurred in respect of its office located inthe Province or a person working in the Province; and
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(2) overhead included in the charges to the Joint Account-PLIOO5 of Affiliates of a PLIOO5 ProjectOwner and which charges have been approved in writing by the Province;
(c) overhead of the Tanker Administrators, the Tanker Cost Aggregator, the Transshipment Operator or ofanyone not dealing at Arm’s Length with any of the foregoing;
(d) overhead of the Unit Operator, the GBS Operator in its capacity as Service Provider to the Unit, the TariffAdministrator, or of anyone not dealing at Arm’s Length with any of the foregoing, unless suchoverhead is incurred in respect of an office located in the Province or a person working in the Province;
(e) interest and other penalties, borrowing costs or financing costs, including, without restricting thegenerality of the foregoing, penalties related thereto, underwriters commissions, investment bankingfees, redemption premiums and other similar costs;
(f) Gross Royalty, Net Royalty, Supplementary Royalty or Additional Royalty or Penalties or interestrelating thereto;
(g) any payment which is measured or calculated with reference to the production of Crude Oil or withreference to the income, revenue or profits from the sale of Crude Oil or the costs of production ofCrude Oil (excepting such costs themselves), which payments include, without restricting the generalityof the foregoing, overriding royalties, net profits interests, net revenue interests, net income interests,carried interests and production payments, but excepting from this item (g) payments of the foregoingnature which are made in relation to the acquisition of a good or service;
(h) marketing costs, excepting those allowed by clause 29.2;
(I) taxes based on revenue, income or profits;
(j) any mark-up by a Project Owner of the charges of a third party;
(k) any mark-up of charges of a Tariff Administrator;
(I) charges for Petroleum produced pursuant to a Licence and consumed by a Resource Project;
(m) any cost incurred or damages paid as a result of Wilful and Deliberate Misconduct or Gross Negligenceon the part of management or supervisory personnel of:
(1) the Project Owners;
(2) a Resource Project Operator;
(3) the Unit Operator;
(4) the GBS Operator;
(5) the Tariff Administrator;
(6) a Tanker Administrator;
(7) the Tanker Cost Aggregator;
(8) the Transshipment Operator; or
(9) any third party contractor to any of the foregoing,
or any of them;
(n) fines paid as a result of any act or omission which is a breach of any laws, rules, regulations, permits,licences, orders or other directives of a government, government department or agency, the Board orany court;
(o) costs incurred in respect of damage to the environment, including costs of environmental clean-up,resulting from the construction, maintenance or operation of a Resource Project and which costs in
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respect of any event or occurrence are in excess of the limits of the insurance policies maintained inrespect of a Resource Project;
(p) depletion, depreciation or any similar or notional allowance;
(q) on account of any funded or non-funded reserve except any reserve allowed by ARTICLE XXXVI;
(r) direct costs of purchasing, leasing or renting any land or building not located within Newfoundland andLabrador or the Offshore Area except where such costs are directly related to Resource Project CapitalActivities;
(s) an amount deducted in determining Gross Transfer Revenue or Resource Project Incidental Revenue;
(t) any fees paid to or costs associated with consultants or advisors to the Project Owners and Licensees,or any of Project Owners and Licensees, relative to the negotiation, preparation and execution of:
(1) this Agreement, the Allocation Agreement or any of them; and
(2) the agreements referred to as the Closing Documents in the Document Escrow and ClosingAgreement, or any of them.
(u) costs paid with proceeds of insurance or with reserves allowed byARTICLE XXXVI where the insurancepremiums or the contributions to the reserve, as the case may be, were a Resource Project EligibleCost, a Resource Project Eligible Marketing Cost or an Eligible Transportation Cost;
(v) premiums for insurance which provide coverage for risks the costs of which would not be a ResourceProject Eligible Cost or a Resource Project Eligible Marketing Cost, except premiums paid for insuranceproviding coverage against risks relative to matters described in items (m) or (o) provided, further, thatwith respect to insurance relating to item (o) such insurance provides coverage which may bereasonably considered to be in excess of the coverage which would be available through a reservepermitted pursuant to clause 36.1(b);
(w) costs that arise from a contractual dispute between the Project Owners or the Project Owners;
(x) costs of the Expansion Expert process, the Data Base Expert process and the Expert determinationprocess, as such processes are described in the Unit Agreement, including all fees, disbursements andadministrative costs; or
(y) an amount on account of, in lieu of or in satisfaction of or in substitution for any of the foregoing.
29.4 Allocation of Costs
Subject to the provisions of the Allocation Agreement, where a cost is not entirely allocable to aResource Project, only the amount of such cost which is reasonably allocable to such Resource Project shall be,subject to satisfying the requirements of this Agreement, a Pre-Development Cost, a Resource Project EligibleCost or a Resource Project Eligible Marketing Cost, as the case may be.
29.5 Allocation Among Project Owners
(i) EL1093
Each Resource Project Eligible Cost-EL1093 shall be allocated among and shared by the ProjectOwners-EL1093 according to the Working Interests of the Project Owners-EL1093 in the ResourceProject-EL1093 at the time the particular Resource Project Eligible Cost-EL1093 was incurred.
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(ii) P11005
Each Resource Project Eligible Cost-PLIOO5 shall be allocated among and shared by the ProjectOwners-PLIOO5 according to the Working Interests of the Project Owners- PLIOO5 in the ResourceProject-PLIOO5 at the time the particular Resource Project Eligible Cost-PLIOO5 was incurred.
29.6 This Clause Intentionally Left Blank
29.7 Insurance Premiums
Notwithstanding the provisions of clauses 29.1(i)(c) and 29.1(ii)(c) and subject to the other provisions ofthis Agreement, premiums for insurance required to be carried by a Project Owner by section 23.2 of theE11093 JOA or the PLIOO5 JOA, as applicable, shall be a Resource Project Eligible Cost.
29.8 Tariffs
Tariff costs shall be determined pursuant to Article 22 of the Allocation Agreement.
ARTICLE XXX: APPLICATION RULES FOR RESOURCE PROJECT COSTS
The application of Article XXIX shall be subject to the following rules as applicable:
30.1 Capital and Operating Costs Determination
The relationship of a Resource Project Eligible Cost to Resource Project Capital Activities and,accordingly, the characterization of a Resource Project Eligible Cost as either a Resource Project EligibleCapital Cost or a Resource Project Eligible Operating Cost, shall, unless otherwise provided for in thisAgreement or the Allocation Agreement, be initially determined by a Resource Project Operator or the UnitOperator, as applicable, having regard to the meaning of Resource Project Capital Activities and, wherenecessary, to the general practices of ExxonMobil in applying Canadian generally accepted accountingprinciples.
30.2 Pre Production Start-Up
Notwithstanding the provisions of clause 30.1, all Resource Project Eligible Costs incurred subsequentto Sanction and prior to Production Start-up shall be Resource Project Eligible Capital Costs.
30.3 Discounts
A Resource Project Eligible Cost shall be reduced by discounts, contributions, refunds (including,without restricting the generality of the foregoing, refunds of a tax which was a Resource Project Eligible Costor a Resource Project Eligible Marketing Cost), government economic assistance (including, without restrictingthe generality of the foregoing, grants, subsidies and credits given by any government which relate to the costsinvolved and excluding any benefit received by a Project Owner as a result of the Income Tax Act (Canada) andany provincial income tax act) and amounts on account of, in lieu of, in satisfaction of or in substitution for anyof the foregoing. The amounts by which Resource Project Eligible costs are reduced pursuant to this clauseshall not at any time receive uplifts pursuant to clauses 30.6 or 30.7 or at any time be included in thecalculation of Net Royalty Return Allowance or Supplementary Royalty Return Allowance. Economic assistancebetween a Project Owner and its Affiliates shall not reduce Resource Project Eligible Costs or ResourcSProject —-
Eligible Marketing Costs pursuant to this clause. Rh
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30.4 Tax Credits
A Resource Project Eligible Cost shall not be reduced by investment tax credits under the Income TaxAct (Canada).
30.5 Disposals Within A Year of Acquisition
Unless a Resource Project Asset disposed of has served its useful life or purpose within a ResourceProject at the time of disposition, the cost of the Resource Project Asset which is disposed of within one year ofits acquisition shall not be a Resource Project Eligible Cost and the proceeds of disposition shall not form partof Resource Project Incidental Revenues or reduce Resource Project Eligible Costs.
30.6 Resource Project Capital Costs Uplift
Subject to clause 30.8, the amount of each Resource Project Eligible Capital Cost shall be one hundredand one per cent (101%) of the Actual Cash Payment.
30.7 Resource Project Operating Costs Uplift
Subject to clause 30.8, the amount of each Resource Project Eligible Operating Cost shall be onehundred and ten per cent (110%) of the Actual Cash Payment.
30.8 Certain Resource Project Costs Not Uplifted
All Resource Project Eligible Costs as are normally considered to be overhead costs shall not receiveuplift pursuant to clause 30.6 or clause 30.7 including, without restricting the generality of the foregoing, thoserelated to the functions of finance, administration, employee relations, information systems, legal services,government relations, public affairs and planning. All Resource Project Eligible Costs pursuant to clause 29.8shall not receive uplift pursuant to clause 30.6 or clause 30.7.
30.9 Affiliates
Charges to the Joint Account by a Project Owner or an Affiliate of a Project Owner, other than suchcharges as may be approved in writing by the Province, shall be the lesser of fair market value or the actualcharge.
30.10 CapItal Leases Etc.
Costs in relation to an asset acquired by a Resource Project pursuant to a Capital Lease or aninstalment or similar purchase shall, subject to satisfying the requirements of this Agreement, be a ResourceProject Eligible Capital Cost only up to an amount equal to the fair market value of the asset at the time ofacquisition by such Resource Project. Capital Lease and instalment or similar purchase payments in excess ofthe fair market value of the asset at the time of acquisition by such Resource Project shall not be a ResourceProject Eligible Cost. All lease, charter and rental payments pursuant to instruments which are not CapitalLeases and which are not related to Resource Project Capital Activities shall, subject to satisfying therequirements of this Agreement, be a Resource Project Eligible Operating Cost. All lease, charter and rentalpayments pursuant to instruments which are not Capital Leases and which relate to Resource Project CapitalActivities shall, subject to satisfying the requirements of this Agreement, be a Resource Project Eligible CapitalCost. )
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30.11 Repair and Maintenance
A repair and maintenance cost of an asset of a Resource Project shall, subject to satisfying therequirements of this Agreement, be a Resource Project Eligible Capital Cost if such cost in a Period exceedsfifty per cent (50%) of the installed cost of an equivalent new asset or results in a material increase in theoriginal productive capacity, efficiency or life of the asset. All other repair and maintenance costs shall,subject to satisfying the requirements of this Agreement, be Resource Project Eligible Operating Costs. For thepurposes only of this clause, an “asset” is a unit of plant or equipment that performs a complete operatingfunction.
30.12 Independent Operations
An independent operation, excluding activities described in clause 29.2, is an operation relative to aResource Project which is conducted on behalf of less than all of the Project Owners of such Resource Project.A cost directly attributable to an independent operation shall not be a Pre-Development Cost or a ResourceProject Eligible Cost unless approved in writing in advance by the Province. Any approval by the Province of anindependent operation shall include the manner, if any, in which the costs and revenues of the independentoperation will be recognized for the purposes of this Agreement.
30.13 Not Available For Use
A Resource Project Asset shall be deemed to have been disposed of at fair market value when theResource Project Asset is no longer available for use by the Resource Project for which it is being used.Notwithstanding the foregoing, a Resource Project Asset shall not be deemed to be disposed of where thatResource Project Asset is temporarily unavailable due to its employment for activities permitted by clause101. The fair market value of a Resource Project Asset of a Resource Project deemed to have been disposedof pursuant to this clause shall be Resource Project Incidental Revenue.
Notwithstanding the above, use of a Resource Project Asset for Unit Production only shall not bedeemed to be a disposition for the purposes of this clause 30.13.
30.14 Sale of Working Interest
The proceeds from a sale of a Working Interest in a Resource Project shall not be included in anycalculations made pursuant to this Agreement.
30.15 Non-Arm’s Length Transactions
Where an asset or service is acquired by a Resource Project pursuant to a transaction, or a series oftransactions any one of which is, not at Arm’s Length, then the amount included in Pre-Development Costs orResource Project Eligible Costs on account of such acquisition shall, subject to satisfying the requirements ofthis Agreement, be the lesser of the cost thereof or the fair market value thereof. Where a Resource ProjectAsset is disposed of or is used for purposes not directly related to the Resource Project for which it is usedpursuant to a transaction, or a series of transactions any one of which is, not at Arm’s Length, the amountincluded in Resource Project Incidental Revenue on account of such disposition or use shall, subject tosatisfying the requirements of this Agreement, be the greater of the payment received or the fair market valueof such Resource Project Asset or use thereof.
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3016 Dispositions
The Project Owners shall dispose of each Resource Project Asset at not less than the fair market valuethereof upon there no longer being a use, as reasonably determined by the applicable Project Owners orapplicable Resource Project Operator, for the Resource Project Asset by a Resource Project, and the fairmarket value of each Resource Project Asset disposed of shall be Resource Project Incidental Revenue. Theobligation of the Project Owners under this clause to dispose of any Resource Project Asset is conditional uponthere being a market for such Resource Project Asset for use for the purposes for which the Resource ProjectAsset was obtained by the applicable Resource Project.
30.17 Payments in Advance
All payments to a Project Owner relative to the sale of Hibernia Crude EL1093/PLIOO5 which arereceived prior to delivery of the Hibernia Crude EL1O93/PLIOO5 shall be included In the Gross Sales Revenueof the Project Owner at the time of receipt and the amount of such receipts shall not be included in Gross SalesRevenue at the time of delivery, if any, of the Hibernia Crude EL1093/PLIOO5 to which such payments relate.Cash refunds of such receipts shall reduce Gross Sales Revenue upon payment. All payments received by aProject Owner in advance of the use or intended use of Resource Project Assets which, if the payment hadbeen received at the time of such use or intended use would have been Resource Project Incidental Revenue,shall, in fact, be included in Resource Project Incidental Revenue at the time of receipt and the amount of suchreceipts shall not be so included at the time of use, if any, of the Resource Project Assets to which suchpayments relate. Refunds of such receipts shall reduce Resource Project Incidental Revenue upon receipt ofpayment of the refund.
30.18 Common Costs
If a cost can be considered to be both a Resource Project Eligible Cost and an Eligible TransportationCost, such cost shall be only a Resource Project Eligible Cost and not an Eligible Transportation Cost.
30.19 EnvIronmental Insurance Deductibles
Notwithstanding the provisions of item (0) of clause 29.3 and subject to the provisions of item (m) ofclause 29.3, costs incurred which represent payment of deductibles pursuant to insurance in respect ofdamage to the environment, including environmental clean-up, or amounts paid in respect of any event oroccurrence which are within the deductible limits of any such insurance, shall, subject to satisfying the otherrequirements of this Agreement, be Resource Project Eligible Costs.
30.20 Certain Expressly Allowed Expenses
For greater certainty the following are cited as examples of situations where costs incurred would,subject to satisfying the requirements of Articles XXIX (other than as set out below) and XXX of this Agreement,be Resource Project Eligible Costs:
(a) “Ex gratia” Payments -
(i) notwithstanding items () and (0) of clause 29.3, payments made voluntarily and prior to, or inanticipation of, a damaging or potentially damaging act by the Project Owners or a Person forwhose actions the Project Owners have any responsibility; or
(ii) notwithstanding item (i)(a) and (ii)(a) of clause 29.1, payments made on account of costs ordamages which are not necessarily attributable to any act or default by the Project Owners,the Licensees, a Resource Project Operator, or any of them;
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(b) Drilling and Re-Drilling Expenses - during normal operations problems may be encountered and a wellmay be lost and may have to be re-drilled;
(c) Blowout and Re-capture Expenses;
(ci) Equipment Damage and Repair Costs - equipment of all descriptions may suffer damage during thecourse of construction, installation or operations and need repairs or replacement; and
(e) Third party damages.
30.21 Exclusion of Amounts Remitted
Any amounts collected by the Project Owners on behalf of a government and remitted to thatgovernment shall not be included in any revenues for the purposes of this Agreement.
ARTICLE XXXI: This Article Intentionally Left Blank
ARTICLE XXXII: This Article Intentionally Left Blank
ARTICLE XXXIII: This Article Intentionally Left Blank
ARTICLE XXXIIIA: ELIGIBLE TRANSPORTATION COSTS DEDUCTION-EL1093/PLIOO5
33.IA This Clause Intentionally Left Blank
33.2A Eligible Transportation Costs Deduction
The Eligible Transportation Costs Deduction-EL1093/PLIOO5 for each Project Ownerforeach Month isthe portion of Eligible Transportation Costs allocated to EL1093/PLIOO5 pursuant to Schedule E of theAllocation Agreement.
33.3A Excess Eligible Transportation Costs
In a Month in which Eligible Transportation Costs Deduction-EL1093/PLIOO5 exceeds Gross SalesRevenue, Gross Transfer Revenue shall be reduced to zero ($0) and the remaining difference between EligibleTransportation Costs Deduction-EL1093/PLIOO5 and Gross Sales Revenue shall be carried forward and addedto Eligible Transportation Costs Deduction-EL1093/PLIOO5 in the following Month.
ARTICLE XXXIV: ABANDONMENT AND DECOMMISSIONING
34.1 Agreed Principles
The Province recognizes that all or a portion of certain agreed out-of-pocket costs which may beincurred in respect of abandonment or decommissioning of a Resource Project should be accorded recognitionin the context of the Net Royalty, the Supplementary Royalty and the Additional Royalty provided for in thisAgreement, acknowledging that there should be, ultimately, a sharing of these costs on an agreed basis.
The Province is prepared to enter into good faith discussions with the Project Owners at some futuredate if the requirements for decommissioning or abandonment of a Resource Project become more clearly
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defined, with the objective of these discussions being to establish a satisfactory method of recognizing all or aportion of such out-of-pocket costs on an agreed basis.
These discussions will be initiated and will proceed at the request of any Party to this Agreement duringor after the development of any applicable legislation or regulations.
34.2 Understandings Re Reserves
Item (q) in clause 29.3 shall not be construed as any agreement by the Province that there should be areserve for the purposes of clause 34.1. Similarly, item (q) in clause 29.3 does not preclude an agreement bythe Province and the Project Owners that there will be a reserve for the purposes of clause 34.1.
ARTICLE XXXV: RETURN ALLOWANCES
35.IA Commencement of Return Allowance Accumulation
Net Royalty Return Allowance and Supplementary Royalty Return Allowance shall begin to accumulatefor purposes of this Agreement at the time of Sanction and not prior thereto.
35.1 Before Production Start-Up
In the event that, prior to Production Start-Up, Force Majeure, Return Allowance Suspension or ProjectTermination occurs then Net Royalty Return Allowance and Supplementary Royalty Return Allowance shall notbe calculated or accrue to the benefit of the Project Owners for the length of time of the occurrence of ForceMajeure or Return Allowance Suspension or after Project Termination.
35.2 After Production Start-Up
In the event that, after Production Start-Up, there is no production of Hibernia Crude EL1093/PLIOO5as a result of Force Majeure, Return Allowance Suspension or Project Termination, then Net Royalty ReturnAllowance and Supplementary Royalty Return Allowance shall not be calculated or accrue to the benefit of theProject Owners for the length of time that there is no production of Hibernia Crude EL1093/PLIOO5 as a resultof Force Majeure or Return Allowance Suspension or after Project Termination.
35.3 Project Withdrawal
In the event of Project Withdrawal by a Project Owner, Net Royalty Return Allowance andSupplementary Royalty Return Allowance shall not be calculated or accrue to the benefit of such Project Ownerafter the time of Project Withdrawal. The provisions of this clause shall not in any manner restrict or limit thebenefits provided to a Successor pursuant to clause 16.5.
35.4 De Minimus Non Curat Lex
The calculation and accrual of Net Royalty Return Allowance and Supplementary Royalty ReturnAllowance shall stop pursuant to this Article only if the period:
(i) of the occurrence of Force Majeure or Return Allowance Suspension prior to Production Start-Up, or
(ii) the period after Production Start-Up in which there is no production of Hibernia Crude EL1093/PLIOO5as a result of Force Majeure or Return Allowance Suspension,
exceeds two (2) days with respect to any one event or exceeds ten (10) days for a Period.
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ARTICLE XXXVI: RESERVES
36.1 Certain Allowed Reserves
Notwithstanding the provisions of item (q) of clause 29.3, an Actual Cash Payment on account of areserve may be a Resource Project Eligible Cost if:
(i) it satisfies the requirements of clauses 29.1, is not disqualified by any of the provisions, exceptingitems (g) or(q), of clauses 29.3 and satisfies the other requirements of thisAgreement, provided that,where a reserve allowed by the other items of this clause 36.1 is imposed upon a Project Owner,Licensee or Resource Project Operator, and is an amount allocable pursuant to item (iii) hereof, thenthe Parties acknowledge that such amounts may be billed to the applicable Joint Account for thepurposes of clause 29.1(i)(c) and 29.1(ii)(c);
(ii) the reserve is required as a result of any law, rule, regulation, permit, licence, order or other directive ofthe Province or Canada, any department or agency thereof, or the Board;
(iii) the obligation for the reserve is imposed either upon a Licensee or a Project Owner with respect to itsinterest in a Resource Project or Licence or upon a Resource Project Operator as operator of theapplicable Resource Project, provided that if the reserve obligation includes the interests of a ProjectOwner or Licensee other than with respect to a Resource Project or the applicable Licence, then theallocation provisions of clauses 29.4 shall be applicable thereto;
(iv) the reserve is a funded reserve and access to the fund is not controlled by the Project Owner, Licenseeor Resource Project Operator, as the case may be; and
(v) the funds in the reserve may not be withdrawn by the Project Owner, Licensee or Resource Projectfrom the reserve except as allowed by the applicable provisions imposing the reserve or upontermination of the Resource Project.
Notwithstanding the other provisions of this clause, there shall not be any reserve on account of:
(a) abandonment or decommissioning unless a reserve on such account is agreed to by theProvince with the Project Owners pursuant to clause 34.1; or
(b) costs incurred in respect of matters contemplated by clauses 29.3(o). Notwithstanding theforegoing, a payment into a reserve, such reserve being in the nature of insurance ascontemplated by clause 29.3(v) exclusive of the final proviso to same, in respect of risksrelative to matters described in clause 29.3(o) shall, subject to the other requirements of thisAgreement, be a Resource Project Eligible Cost. For the purposes of this provision a reservemay be considered to be in the nature of insurance as contemplated by clause 29.3(v) inrespect of risks relative to matters described in clause 29.3(o) if it potentially provides forpayment for the purposes for which the reserve was established in excess of the contribution ofthat Project Owner plus interest which could reasonably be attributed thereto.
36.2 Provisions Re Allowed Reserves
In respect of any reserve allowed by clause 36.1:
(i) The Actual Cash Payments made on account of the reserve shall not receive uplifts pursuant to clauses30.6 or 30.7 but shall be taken into account in calculating Net Royalty Return Allowance orSupplementary Royalty Return Allowance;
(ii) If payments made out of the reserve to a Project Owner, Licensee or Resource Project Operator are notapplied by it for a purpose which the reserve is applicable to and relating to the Resource Project, suchamounts shall be Resource Project Incidental Revenue; and
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(iii) All amounts returned, other than as provided for in item (ii) above, to the Licensees, Project Owners orResource Project Operators from a reserve shall be Resource Project Incidental Revenue.
ARTICLE XXXVII: CRUDE OIL VALUATION
37.1 General
It is agreed by all Parties to this Agreement that the Sale Price must reflect fair market value at theSale Point taking into account factors which are relevant to the nature, time and context of such sale.
37.2 Monthly Information
Each Monthly Summary submitted by a Project Owner to the Province shall include for each Sale Pricereported therein, the estimated landed price at the Sale Point of not less than two widely-traded referenceCrude Oils, quality adjusted for Hibernia Crude EL1093/PLIOO5.
37.3 Information Provided by Province
In the event that the Province makes any redetermination or recalculation of, or in respect of, theRoyalty Share based upon the Sale Price not reflecting fair market value as required by clause 37.1, then atthe time of such redetermination or recalculation the Province shall provide the Project Owner with itsexplanation of the reasons for its redetermination or recalculation. Notwithstanding the foregoing, theprovisions of this clause do not obligate the Province to disclose any confidential information received by theProvince with respect to the pricing of any other Project Owner, until the time of an arbitration pursuant toclause 24.5.
37.4 Review by Arbitrators
Where the Province has made a redetermination or recalculation of, or in respect of, the Royalty Sharebased upon the Sale Price not reflecting fair market value as required by clause 37.1, and the Project Ownerhas chosen to submit the matter to arbitration pursuant to clause 24.5, the arbitrators in determining fairmarket value of the Sale Price at the Sale Point shall not be restricted as to the nature of the information orevidence which may be considered. The arbitrators, in assessingthe information and evidence produced beforethem, shall be the sole determinators of the weight and relevance to be given to any particular factor. Inparticular, the Parties specifically acknowledge their agreement that nothing contained in this Article orelsewhere in this Agreement or the Allocation Agreement shall be taken to direct or suggest that suchassessment of fair market value must be conducted at the time of delivery, loading, entry into the contract orany other specific time. Rather, it is the agreement of the Parties that the arbitrators in making suchassessment shall be allowed to determine that time which, taking into account the factors generally set forthin clause 37.1 above, is appropriate for determination of fair market value for that sales arrangement.
37.5 Sale Prices Not Uniform
It is acknowledged that fair market value in respect of any particular sale by a Project Owner will beinfluenced by numerous factors and accordingly there may be a range of values within which fair market valuemay be determined at the Sale Point.
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PARTV: GENERAL
ARTICLE XXXVIII: GOVERNING LAW
38.1 Governing Law
This Agreement shall be governed by, and construed in accordance with, the laws in force inNewfoundland and Labrador.
38.2 Attornment
Each Party hereto irrevocably submits to and accepts the exclusive jurisdiction of the courts ofNewfoundland and Labrador and all courts of appeal therefrom as regards any legal proceedings relative tothis Agreement which involve or may involve the Province and agrees that no legal proceedings regarding thisAgreement which involve or may involve the Province shall be instituted in the courts of any other jurisdictionexcept to enforce a judgment or order issued in legal proceedings commenced in the courts of Newfoundlandand Labrador except as otherwise specifically provided for herein. Each Party hereto irrevocably waives, to thefullest extent that it may effectively do so, the defence of an inconvenient forum to the maintenance of anylegal proceedings relative to this Agreement. Each of the Parties hereto irrevocably agrees that a finaljudgement of the courts of Newfoundland and Labrador or any court of appeal therefrom and in respect ofwhich all appeal periods have expired without appeal shall be conclusive and may be enforced in otherjurisdictions by legal proceedings on the judgement or in any other manner provided by law.
38.3 Address for Service of Legal Process
Each Project Owner and each Licensee hereby appoints the Person whose name is set forth below to beits agent to receive on its behalf service of all and any papers which may be served in any legal proceedingsrelative to this Agreement which involve the Province:
Managing Partnerc/o Stewart McKelveyCabot Place100 New Gower StreetP.O. Box 5038St. John’s, Newfoundland and LabradorCanadaAIC 5V3
Each Project Owner and each Licensee hereto shall at all times throughout the currency of this Agreementhave an agent within Newfoundland and Labrador to receive service on its behalf as aforesaid. A Licensee orProject Owner may change its agent by written notice to the Province and the other Project Owners andLicensees. The provisions of this clause shall not restrict the ability of any Party to this Agreement to effectservice in any other manner permitted by law. Each Project Owner and Licensee agrees that service upon itsagent appointed in or pursuant to this clause made in the manner provided for in Article XXXIX is, and waiveseach and all objections which it may hereafter have that service made In the manner provided for in this clauseis not, valid and effective service for the purposes of any legal proceedings relative to this Agreement whichinvolve the Province.
ARTICLE XXXIX: NOTICES
39.1 Form and Delivery
Notices or other communications from one Party to another (hereinafter collectively referred to as“Notices”) that are required or permitted under this Agreement shall be in writing and shall be by
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hand or by courier, sent by prepaid registered mail, or be transmitted by facsimile or other similar form oftelecommunication, to the Party to whom it is to be given at the following addresses:
(i) Her Majesty in Right of the Province of Newfoundland and LabradorP.O. Box 8700, Main FloorEast Block, Confederation BuildingSt. John’s, NL AIB 4J6Attention: Minister of Natural ResourcesFacsimile: (709) 729-0059Telephone: (709) 729-2920
(ii) ExxonMobil Canada Properties, ExxonMobil Canada Hibernia Company Ltd. or ExxonMobil Canada Ltd.Suite 1000, Cabot Place 100 New Gower StreetSt. John’s, NL AIC 6K3Attention: PresidentFacsimile: (709) 754-1043Telephone: (709) 778-7000
(iii) Chevron Canada Resources or Chevron Canada Limited500 - 5 Avenue S.W.Calgary, Alberta T2P 0L7Attention: Vice President, Asset DevelopmentFacsimile: (403) 234-5979Telephone: (403) 234-5000
(iv) Statoil Canada Ltd.Suite 600, Scotia Centre235 Water StreetSt. John’s, NL AIC 1B6
Attention: Vice President, Offshore UpstreamFacsimile: (709) 726-9053Telephone: (709) 726-9091
(v) Petro-Canada Hibernia Partnership or Suncor Energy Inc.Scotia Centre, 235 Water StreetSt. Joh&s, NL AIC 1B6Attention: Vice President, East CoastFacsimile: (709) 724-2835Telephone: (709) 778-3500
(vi) Canada Hibernia Holding Corporation1750 Sun Life Plaza, West Tower144 - 4th Avenue SWCalgary AB T2P 3N4Attention: Vice President and Chief Operating OfficerFacsimile: (403) 269-7861Telephone: (403) 269-7858
(vii) Murphy Atlantic Offshore Oil Company Ltd.1700, 555 4th Ave S.W.Calgary AB T2P 3E7Attention: Vice President Joint Ventures and Business DevelopmentFacsimile: (403) 294-8851Telephone: (403) 294-8000
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(viii) Nalcor Energy — Oil and Gas Inc.P.O. Box 12800St. John’s, NL AIB 0C9Attention: Vice PresidentFacsimile: (709) 737-1416Telephone: (709) 737-1440
39.2 Deemed Delivery
For the purposes of this Agreement, Notices given by one Party hereto to another shall:
(a) where delivered by prepaid registered mail, be conclusively deemed to have been given on the fourthday (except Saturdays, Sundays, statutory holidays and days upon which postal service in Canada isinterrupted) after the mailing thereof;
(b) where delivered to the receiving Party by hand or by courier, be conclusively deemed to have beengiven at the time of delivery; and
(c) where transmitted to the receiving Party by facsimile or other similar form of telecommunication, beconclusively deemed to have been given at 10:00 o’clock in the forenoon (local time of the recipient)on the next Business Day following the day on which it is transmitted.
39.3 Change of Address
A Party may give Notice of a change of address in the manner provided in clause 39.1, in which eventNotices shall thereafter be given to that Party at such changed address.
ARTICLE XL: MISCELLANEOUS
40.1 Prior Agreements
This Agreement and the Schedules to this Agreement supersede all prior agreements, understandingsor writings among the Parties, whether written or oral and whether legally enforceable or not, in connectionwith the Resource Projects.
40.IA Stability
The Province acknowledges that each of the Project Owners relies upon the good faith of the Provinceto maintain substantially the legislative and regulatory framework applicable to the Resource Projects as of thedate of this Agreement, to the extent that doing so is in the public interest and, without limiting the generalityof the foregoing, is consistent with governmental responsibilities, including responsibility for ensuring propermanagement of its resources, the protection and maintenance of public health and safety and the protectionof the environment. Each of the Project Owners acknowledges that the Province relies upon the good faith ofeach of the Project Owners, respectively, to carry out its undertakings in this Agreement.
40.2 Inurement
This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and theirrespective successors and assigns as provided for herein.
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40.3 Relationship of Parties
It is not the intention of the Parties hereto to create nor shall this Agreement create or be construed ascreating any partnership or agency relationship among the Parties hereto, or any of them, so as to render theParties hereto, or any of them, liable to the other Parties hereto, or any of them, for anything more than theperformance of their respective obligations in accordance with the terms of this Agreement. Nothing in thisAgreement gives any Party hereto the right to take any action, and no Party hereto shall purport pursuant or inrelation to this Agreement to take any action, that is binding upon any other Party hereto without the priorwritten consent of that other Party hereto.
40.4 WaIver in Writing
No waiver by a Party hereto of any provision, or the breach of any provision, of this Agreement shall beeffective unless it is contained in a written instrument signed by authorized officers or representatives of theParty hereto. Such written waiver shall affect only the matter specifically identified in the instrument grantingthe waiver and shall not extend to any other matter, provision or breach.
40.5 Delay Not Waiver
The failure of a Party hereto to give notice to any other Party hereto or to take any other steps inexercising any right, or in respect of the breach or non-fulfilment of any provision of this Agreement, shall notoperate as a waiver of that right, breach or provision nor shall any single or partial exercise of any rightpreclude any other or future exercise of that right or the exercise of any other right, whether in law or in equityor otherwise.
40.6 Acceptance of Payment Not Waiver
Acceptance of payment by a Party hereto after the breach or non-fulfilment of any provision of thisAgreement by another Party shall not constitute a waiver of the provisions of this Agreement, other than anybreach cured by such payment.
40.7 Time of the Essence
Time shall be of the essence of this Agreement.
40.8 Further Assurances
Each of the Parties hereto shall at its own cost and expense, from time to time and without furtherconsideration, execute or cause to be executed all documents which are necessary to give effect to theprovisions of this Agreement.
40.9 No Additional Equity
Notwithstanding the Energy Plan, or any other policy, regulation, or legislation of the Province relatingto energy resources, any beneficial or working interest participation in EL1093/PL1005 Royalty Area by theProvince, its agent, or any provincially-controlled corporation shall be limited to the interest, if any, acquired byNalcor Oil, its successors or permitted assigns in accordance with the Acquisition Agreement, unless suchinterest is acquired by way of an agreed acquisition between any of the Parties.
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ARTICLE XLI: EXECUTION
41.1 Partnership Execution
The partners of each of the Parties hereto that is a partnership have executed this Agreement only intheir respective capacities as a partner in such partnership for the purposes of such partnership executing thisAgreement and such partners have not executed this Agreement in the capacity of a Party to this Agreement.
41.2 Counterpart Execution
This Agreement may be executed in any number of counterparts and by different Parties in separatecounterparts, each of which when so executed shall be deemed to be an original and all of which takentogether shall constitute one and the same agreement.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF each of the Parties to this Agreement have caused this Agreement to be executed
by their officers or representatives duly authorized in that behalf on the date first above written.
HER MAJESTY IN RIGHT OF THE PROVINCE OF NALCOR ENERGY-OIL AND GAS INC
NEWFOUND D AND RDOR
signatuz&ç \ Signature:
____________________________
Name:
____________________________
Name: EJ. Martin
Title: it— (AT Title: President and Chief Executive Officer
__________________________
Signature:
Name:
______________________________
Name: James M. Kepting
Title: J{t ç9Z!) k1O1&D (<bOfcgA_— Title: Vice President
EXX0NMOBIL CANADA PROPERTIES EXXONMOBIL CANADA HIBERNIA COMPANY LTD.
Signature: Signature:
Name: Glenn Scott Name: Glenn Scott
Title: President Title: President
EXXONMOBIL CANADA LTD. CANADA HIBERNIA HOLDING CORPORATION
Signature: Signature:
Name: Glenn Scott Name: Murray Todd
Title: President Title: President and Chief ExecutiveOfficer
CHEVRON CANADA RESOURCES, a partnership, by CHEVRON CANADA LIMITEDits Managing Partner, CHEVRON CANADA LIMITED
Signature: Signature:
Name:
____
ST. Hutchlsofl Name: ST. Hutchjson
Title: Vice President Title: Vicesident
Signature:
______________________________
Signature:
______________________________
Name: Jeff Wasko Name: Jeff Wasko
Title: Vice President Title: Vice President
78
IN WITNESS WHEREOF each of the Parties to this Agreement have caused this Agreement to be executedby their officers or representatives duly authorized in that behalf on the date first above written.
HER MAJESTY IN RIGHT OF THE PROVINCE OF NALCOR ENERGY-OIL AND GAS INC.NEWFOUNDLANDANDLABRDOR —“ J i’Signature:
_______________________________
Signature:
______________________________
Name:
______________________________
Name: E.J. Martin
Title:
___________________________________
Title: President and 9ief Executive Officer
Signature:
_______________________________
Signature:
________________________________
Name:
______________________________
Name: James . Keating
Title:
___________________________________
Title: Vice President
EXXONMOBIL CANADA PROPERTIES EXXONMOBIL CANADA HIBERNIA COMPANY LTD.
Signature:
_______________________________
Signature:
Name: Glenn Scott Name: Glenn Scott
Title: President Title: President
EXXONMOBIL CANADA LTD. CANADA HIBERNIA HOLDING CORPORATION
Signature:
_______________________________
Signature:
_________________________________
Name: Glenn Scott Name: Murray Todd
Title: President Title: President and Chief ExecutiveOfficer
CHEVRON CANADA RESOURCES, a partnership, by CHEVRON CANADA LIMITEDits Managing Partner, CHEVRON CANADA LIMITED
Signature:
_________________________________
Signature:
___________________________________
Name: S.T. Hutchison Name: S.T. Hutchison
Title: Vice President Title:
_____
Vice President
Signature:
_______________________________
Signature:
_______________________________
Name: Jeff Wasko Name: Jeff Wasko
Title: Vice President Title: Vice President
78
IN WITNESS WHEREOF each of the Parties to this Agreement have caused this Agreement to be executedby their officers or representatives duly authorized in that behalf on the date first above written.
HER MAJESTY IN RIGHT OF THE PROVINCE OFNEWFOUNDLAND AND LABRDOR
Signature:
Name:
Title:
NALCOR ENERGYOIL AND GAS INC.
Name: EJ. Martin
Title: President and Chief Executive Officer
Sintr
Name:
Title:
Name: jMKeaflijL.
Title: VIce President
EXXONMOBIL CAADPROyERTIES
signature:
Name: Glenn Scott
Title: President
EXXONMOBIL CANADA HIBERNIA COMPANY LTD../
Signature:
Name:lenn ft
Title: ffffdent
EXXON MOBIL CANADA LTD. /-
Signature:______
Name: Glenn Scott
Title: President
CHEVRON CANADA RESOURCES, a partnershIp, byits Managing Partner, CHEVRON CANADA LIMITED
signature:
Name: S.T. Hutchison
Title: Vice President
Signature:
Name: Jeff Wasko
Title:jLjfipsiclnt.
CANADA HIBERNIA HOLDING CORPORATiON
Signature:
Na me:
Title: President and Chief ExecutiveOfficer
CHEVRON CANADA LIMITED
Signature:
Name: S.T. Hutchison —_________
Title: .fesident
Signature:
Name: Jeff Wasko
Title:yjçjdit
78
IN WITNESS WHEREOF each of the Parties to this Agreement have caused this Agreement to be executed
by their officers or representatives duly authorized in that behalf on the date first above written.
HER MAJESTY IN RIGHT OF THE PROVINCE OF NALCOR ENERGY-OIL AND GAS INC.
NEWFOUNDlAND AND LABRDOR
Signature:
________________________________
Signature:
Name:
_____________________________
Name: E.J. Martin
Title:
_________________________________
Title: President and Chief Executive Officer
Signature: Signature:
Name:
_______________________________
Name: James M. Keating
Title:
_________________________________
Title: Vice President
EXXONMOBJL CANADA PROPERTIES EXXONMOBIL CANADA HIBERNIA COMPANY LTD.
Signature:
_____________________________
Signature:
______________________________
Name: Glenn Scott Name:. Glenn Scott
Title: President Title: President
EXXONMOBIL CANADA LTD. CANADA HIBERNIA HOLDING CORPORATION
Signature:
___________________________
Signature:
____________________________
Name: Glenn Scott Name: Murray Todd
__________________________________
Title: President ançi Chief Executive
Officer
CHEVRON CANADA RESOURCES, a partnershIp, by CHEVRON CANADA UMITED
its Managing Partner, CHEVRON CANADA LIMITED
Signature:Signature:
______________________________
Name: S.T Hutchison Name: ST. Hutchison
Title: Vice President Title: Vice President
Signature:
__________
Signature:
____________________________
Name: Jeff Wasko Name: Jeff Wasko
Title: Vice President Title: Vice President
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78
IN WITNESS WHEREOF each of the Parties to this Agreement have caused this Agreement to be executedby their officers or representatives duly authorized in that behalf on the date first above written.
HER MAJESTY IN RIGHT OF THE PROVINCE OFNEWFOUNDLAND AND LABRDOR
Signature:
Name:
______________________________ ______________________________
Title:
____________________________________ ____________________
Signature:
Name:
_________________________________ __________________
Title:
__________________________________ ______________
EXXONMOBIL CANADA PROPERTIES
Signature:
Name: Glenn Scott
Title: President
EXXONMOBIL CANADA 1-IIBERNIA COMPANY LTD.
Signature:
Name: Glenn Scott
Title: President
Signature:
Name: Murray Todd
Title: President andOfficer
CHEVRON CANADA RESOURCES, a partnership, by
Name: ST. Hutchison
Title: Vice President
Signature:/ 2/
Name: Jeff Wãsko
Title: Vice President
CHEVRON CANADA LIMITED
Signature:
Name: ST. Hutchison
Title: Vice President
Signature:
Name: Jeff Wasko
Title: Vice Prent
____________
NALCOR ENERGY-OIL AND GAS INC.
Signature:
Name: E.J. Martin
Title: President and Chief Executive Officer
Signature:
Name: James M. Keating
Title: Vice President
EXXONMOBIL CANADA LTD.
Signature:
Name: Glenn Scott
Title: President
CANADA HIBERNIA HOLDING CORPORATION
Chief Executive
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79
SUNCOR ENERGY INC. PETRO-CANADA HIBERN1A PARTNERSHIP, a partnershipby Its Managing Partner, SUNCOR ENERGY INC.
signature:
____
Signature: /%4
Name: Alan Brown Name: Alan Brown
Title: Authorized_Signapry Title: Authorized Signatory
STATOIL CANADA LTD. MURPHY ATLANTIC OFFSHORE OIL COMPANY LTD.
Signature: Signature:
________________________________
Name: jjgJoggø Name: Cal C. Buchanan
Title: Vice fresic en1OffsbQe,, Title: Vice PresidentUpean
This is a counterpart execution page to the Hibernia Development Project PLIOO5-EL1093 Royalty Agreement
dated the 16th day of February, 2010.
A
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79
SUNCOR ENERGY INC.
Signature:
Name: Alan Brown
Title: Authorized Signatory
PETRG-CANADA KIBERNIA PARTNERSHIP, a partnershipby Its Managing Partner, SUNCOR ENERGY INC.
Signature:
Name: Alan Brown
Title: Authorized Signatory___________
STATOIL CAN A LTD.
Signature: ,
Name: Hee Rognø
Title: Vice President. OffshoreUrstream
MURPHY ATLANTIC OFFSHORE OIL COMPANY LTD.
Signature:
Name: Cal C. Buchanan
Title: Vice President
This isa counterpart execution page to the Hibernia Development Project PLIOO5-EL1093 Royalty Agreementdated the 16th day of February, 2010.
wj j12i 4
79
SUNCOR ENERGY INC. PETRO-CANADA HIBERNIA PARTNERSHIP, a partnershipby Its Managing Partner, SUNCOR ENERGY INC.
Signature: Signature:
Name: Alan Brown Name: Alan Brown
Title: Authorized Signatory Title: Authorized Signatory
STATOIL CANADA LTD. MURPHY ATLANTIC OFFSHORE OIL COMPANY LTD.
signature: Signature:
_____________________________
—-
Name: liege Rognø Name: Cal C. Buchanan
Title: Vice President, Offshore Title: Vice PresidentUpstream
This Is a counterpart execution page to the Hibernia Development Project P11005-EL1093 Royalty Agreement
dated the 16 day of February, 2010.
80
SCHEDULE “A” TO THE AGREEMENT
DEFINITIONS APPLICABLE TO THE AGREEMENT
“Access to Information and Protection of Privacy Act” means the Access to In formation and Protection ofPrivacy Act, S.N.L. 2002, c. A1.1, and includes the regulations made and, from time to time, in force underthat Act.
“Accord Act” means those provisions only of the Federal Accord Act and the Provincial Accord Act that areidentical.
“Acquisition Agreement” means the agreement entitled “Hibernia Southern Extension Acquisition Agreement”made among the Project Owners and Licensees dated February 16, 2010.
“Actual Cash Payment” means, in addition to payments in cash, payments by cheque, bank draft, bank transferor other instruments transferring credits of money.
AdditionaI Royalty” means the royalty described in Article XXIA of the Agreement.
“Affiliate” means, with respect to a Person, any Person that controls it, that is controlled by it or that is undercommon control with it and:
(a) if two Persons are Affiliates of a Person at the same time, they are Affiliates of each other;
(b) for the purposes of this definition, “control” means control in fact, including the ability, directly orindirectly and whether or not exercised, to direct the management or policies of a Person, whetherthrough the ownership of securities, by contract, trust or otherwise howsoever;
(c) in relation to a corporation, includes all Subsidiaries of that corporation, each corporation of which it isa Subsidiary and all Subsidiaries of each corporation of which it is a Subsidiary;
(d) each Person which is an Affiliate of that first Person by virtue of items (a), (b) or (c) of this definition isan Affiliate of each limited partnership of which the first Person or any Affiliate of the first Person is ageneral partner and of each partnership other than a limited partnership which the first Person and/orany Affiliate of the first Person controls by virtue of item (b) of this definition; and
(e) a Person controlled by virtue of item (b) of this definition by two or more Project Owners is art Affiliateof each of those Project Owners. For the purposes of this item, “Project Owner” includes each Personwhich is an Affiliate of the Project Owner.
Notwithstanding the other provisions of this definition, a Project Owner or Licensee shall not be an Affiliate ofany other Project Owner or Licensee only by virtue of that Project Owner or Licensee being an Affiliate of aResource Project Operator, a Tanker Administrator, the Tanker Cost Aggregator, or a Transshipment Operator.
Agreement”. “this Agreement” or “the Agreement” means the agreement to which this Schedule is Schedule
“Allocation Agreement” means the agreement entitled the Hibernia Development Project Allocation Agreementmade among the Project Owners, the Licensees and the Province dated February 16, 2010.
“Annual Reconciliation” means the reconciliation referred to, and in the form and certified as provided for, inclause 24.7 of the Agreement.
“approved DPA” means the first amendment to the Hibernia development plan approved pursuant to theAccord Acts after the date hereof.
“Arm’s Length” shall have the meaning given by section 251 of the Income Tax Act (Canada) as of the date ofthis Agreement, as judicially interpreted, to “arm’s length” provided, however, that in connection with a sale, oran acquisition of an asset other than Hibernia Crude EL1093/PLIOO5 or of a service, the followinwill not beat Arm’s Length:
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81
(I) a sale or acquisition involving a Project Owner or an Affiliate of a Project Owner and one ormore of the Project Owners and any Affiliate of a Project Owner;
(ii) where the consideration is payable otherwise than solely in cash;
(iii) the contract price is not the sole consideration for the sale or transaction;
(iv) the contract terms are materially affected by any commercial relationship (other than thatcreated by the contract itself) among any of the parties thereto or anyone not otherwise atArm’s Length with such parties;
(v) such other circumstances as the Province may reasonably declare, after discussion with theProject Owners, not to be at Arm’s Length and any disagreement that a Project Owner mayhave with any such declaration by the Province which cannot be resolved by discussions withthe Province may be submitted to arbitration by the Project Owner.
“Audit Period” means the six (6) calendar years following the calendar year in which royalties were payablepursuant to the Agreement or in which a Resource Project Eligible Cost, Resource Project Eligible MarketingCost or an Eligible Transportation Cost was paid.
“Barrel” means 0.1589873 cubic metres, which shall for purposes of this Agreement be the equivalent of 42U.S. gallons or 34.9722 Canadian gallons, when measured at a temperature of 60 degrees Fahrenheit.
“Board” means the Canada-Newfoundland and Labrador Offshore Petroleum Board established by the AccordAct.
“Business Day” means any day, other than a Saturday or a Sunday, on which the offices of the Department ofNatural Resources of the Province, or any successor department of the Province, are open for business.
“Canada” means Her Majesty the Queen in right of Canada.
“Capital Lease” means a lease relative to assets which have a fair market value at the time the lease isentered into of more than one hundred thousand Dollars ($100,000.00) and which would be classified as acapital lease under the Canadian Institute of Chartered Accountants’ Handbook at the time the lease is enteredinto and includes any renewals or extensions of that lease. If the effect of an amendment to a lease which,prior to the amendment, was not a Capital Lease would be to make the lease a capital lease under theCanadian Institute of Chartered Accountants’ Handbook at the time of the amendment to the lease is effective,then the lease shall be a Capital Lease from the time the amendment was effective. If the effect of anamendment to a lease which, prior to the amendment, was a Capital Lease would be to make the lease otherthan a capital lease under the Canadian Institute of Chartered Accountants’ Handbook at the time of theamendment to the lease is effective, than the lease shall not be a Capital Lease from the time the amendmentwas effective. The one hundred thousand Dollar ($100,000.00) amount set forth in this definition shallincrease or decrease on the first day of each calendar year since September 1, 1990 by an amountproportionate to the amount of the increase or decrease, respectively, in the Supplementary Royalty Index forthe Month of July of the second preceding calendar year to the Month of July of the immediately precedingcalendar year.
“Charged Premises” shall have the meaning provided for in clause 13.1 of the Agreement.
“Confidentiality Declaration” means an indenture in the form of Schedule “E”.
“Crude Oil” means hydrocarbons which at atmospheric pressure are in liquid form when loaded into marinetankers and include non-hydrocarbon contaminants.
“Document Escrow and Closing Agreement” means the agreement entitled Hibernia Southern ExtensionDocument Escrow and Closing Agreement, made amongst the Parties, Hibernia Management andDevelopment Company Ltd., Osler, Hoskiri & Harcourt LLP and Stewart McKelvey and dated February 16,2010.
“PQijj”or1” means a dollar of the lawful money of Canada.
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“EL1093” means the Exploration Licence 1093 issued by the Board dated January 15, 2005, provided thatupon the issuance of the first significant discovery licence or the first production licence or other similar rightthat is issued and that supersedes such exploration licence in relation to the geographic area that is currentlythe subject of EL1093, all references to EL1093 shall instead be read as referring to that successor significantdiscovery licence, production licence or other similar right
“EL1093 JOA” means a joint operating agreement applicable to EL1093 other than the Unit.
“EL1093 Licensees” means, collectively ExxonMobil, ExxonMobil Hibernia, Chevron,Suncor, Murphy Oil, CHHC,Statoil and Nalcor Oil and any Successors which have become bound by this Agreement, and “EL1093Licensee” means any one of the EL1093 Licensees.
“EL1093 Proiect Owners” means, collectively, ExxonMobil Partnership, Chevron Partnership, Petro-CanadaPartnership, Murphy Oil, CHHC, ExxonMobil Hibernia, Statoil, and Nalcor Oil, and any Successors who havebecome bound by this Agreement and “EL1093 Project Owner” means any one of the EL1093 Project Owners.
“EL1093/PLIOO5 Royalty Area” means the geographic areas that are the subject of EL1093 and PLIOO5.
“Eligible Tanker Costs” shall have the meaning set out in the Allocation Agreement and an “Eligible TankerCost” shall mean any such cost.
“Eligible Transportation Costs” shall have the meaning set out in the Allocation Agreement and an “EligibleTransportation Cost” shall mean any such cost.
“Eligible Transportation Costs Deduction-EL1093/PLIOO5” shall have the meaning provided for In clause33A.2 of the Agreement.
“Energy Plan” means the document entitled “Focusing Our Energy” released by the Province on September11,2007.
“Estimate” is defined in clause 22.11 of the Agreement for the purposes only of Article XXII.
“FOSA” means the agreement made amongst Hibernia Management and Development Corporation and theProject Owners entitled the “Facilities and Operating Services Agreement”, effective July 15, 2009.
“Federal Accord Act” means the Canada-Newfoundland Atlantic Accord Implementation Act, S.C. 1987 c. 3,and includes the regulations made and, from time to time, in force under that Act.
“Force Majeure” means one or more of the following events:
(i) acts of God and actions of natural elements;
(ii) wars, revolutions, insurrections, riots and disturbances, blockades, and other unlawful acts againstpublic order or authority;
(iii) strikes, lockouts and labour disturbances;
(iv) directions, orders, injunctions, legislation or regulations by governments, governmental authoritieshaving or purporting to have jurisdiction and courts excepting directions, orders or injunctions of courtsor governmental authorities as a result of the unlawful acts of a Project Owner, a Resource ProjectOperator, the Unit Operator, the GBS Operator, the Tariff Administrator, a Tanker Administrator, theTanker Cost Aggregator, or a Transshipment Operator;
(v) any other event of the nature of the foregoing which is not reasonably in control of the Party to theAgreement claiming Force Majeure,
provided, however, that lack of finances or change in economic circumstances shall not in any event be, ofthemselves, an event of Force Majeure and shall not extend an event of Force Majeure.
“B” means the Hibernia gravity base structure located on PLIOOI and commissioned in 1937.
shall have the meaning set out in the Allocation Agreement. 1’
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“Gross Negligence” means negligence which substantially exceeds ordinary negligence, which results in theincurrence of a cost, expense or liability and which constitutes such a marked, fundamental or excessivedeparture from good oilfield practice so as to amount to reckless indifference to, or reckless disregard of, therequirements of good oilfield practice and the probable consequences of such departure.
“Gross Royalty” means the royalty described in ARTICLE XIX of the Agreement.
“Gross Royalty Rate” means the percentage rate at which Gross Royalty is payable as prescribed in clause 19.3of the Agreement.
“Gross Sales Revenue” means for a Project Owner, for any Month or Period, the portion of its Hibernia BlendGross Sales Revenue allocated to EL1093 and PLIOO5 pursuant to clause 21.3 of the Allocation Agreement.
“Gross Transfer Revenue” means for a Project Owner, in respect of any Month or Period, the Gross SalesRevenue of the Project Owner during such Month or Period, as the case may be, reduced by the EligibleTransportation Costs Deduction-EL1093/PLIOO5 for the Project Owner during such Month or Period.
“Hibernia Blend” means Crude Oil processed through the G8S which is produced pursuant to PLIOOI, PLIOO5or EL1093 and includes any blend of such Crude Oil processed through the GBS and produced from two ormore of PLIOOI, P11005 and EL1093.
“Hibernla Blend Gross Sales Revenue” shall have the meaning set out in the Allocation Agreement.
“Hibernia Crude EL1093/PU005” means Crude Oil which is allocated to EL1093 or PLIOO5 in accordancewith the Allocation Agreement.
“In-Kind Value” means, for any Month, the product obtained by multiplying the volume of Hibernia CrudeELIO93/PLIOO5, as measured at the Loading Point, taken in kind by the Province on account of the RoyaltyShare of a Project Owner by the Project Owner’s Transfer Price for the Month. The In-Kind Value for a Periodshall be the sum of the In-Kind Values for each Month in that Period.
“Inventory Volume” is defined in clause 24.8 of the Agreement for the purposes only of that clause.
“Joint Accounts” means collectively Joint Account-EL1093 and Joint Account-PLIOO5, and “Joint Account”means either of them.
“Joint Account-EL1093” means the provisions of the ELIO93 JOA which provide for, and the accounts whichshow, the charges paid and credits received as a result of operations conducted for the Resource ProjectEL1093 and which are shared by the Project Owners in accordance with their Working Interests in ResourceProject-E11O93 and the standards, procedures, rules and review provided for with respect thereto including,without restricting the generality of the foregoing, the provisions of the EL1093 JOA identified in clause 15.1 ofthe Agreement.
“Joint Account-PLIOO5” means the provisions of the PLIOO5 JOA which provide for, and the accounts whichshow, the charges paid and credits received as a result of operations conducted for the Resource ProjectPLIOO5 and which are shared by the Project Owners in accordance with their Working Interests in ResourceProject-PLIOO5 and the standards, procedures, rules and review provided for with respect thereto including,without restricting the generality of the foregoing, the provisions of the P11005 JOA identified in clause 15.1 ofthe Agreement.
“Licences” means collectively PLIOO5 and EL1093, and “Licence” means either of the Licences.
“Licensees” means, collectively, the PLIOO5 Licensees and the EL1093 Licensees and “Licensee” means anyone of the Licensees.
“Loading Point” means the final point of measurement on the GBS or facilities physically connected thereto forloading Hibernia Crude EL1093/PL1005 into marine tankers.
“Material Default” shall have the meaning provided for in clause 25.7 of the Agreement. aJV“Month” means a calendar month.
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“Monthly Summary” means the summary referred to, in the form and containing the information provided for,in clause 26.4 of the Agreement.
“Natural Gas” means hydrocarbons other than Crude Oil.
“Net Royalty” means the royalty described in ARTICLE XX of the Agreement.
“Net Royalty Payout” means, for a Project Owner, the first point in time when the sum of:
(I) cumulative Gross Transfer Revenue of the Project Owner; plus
(ii) the Project Owner’s Working Interest share of cumulative Resource Project Incidental Revenue
equals the sum of:
(iii) the Project Owner’s Working Interest share of Pre-Development Costs;
(iv) the Project Owner’s Working Interest share of cumulative Resource Project Eligible Costs, other thanTariffs;
(v) the Project Owner’s share of cumulative Resource Project Eligible Costs for Tariffs as determinedpursuant to Article 22 of the Allocation Agreement;
(Vi) cumulative Gross Royalty paid by the Project Owner excepting thereout any amount on account ofGross Royalty paid in kind;
(vii) cumulative Net Royalty Return Allowance to which the Project Owner is entitled; plus
(viii) cumulative Resource Project Eligible Marketing Costs paid by the Project Owner.
“Net Royalty Return Allowance” means, for a Project Owner, for any Month, the product of the Net RoyaltyReturn Allowance Factor and the amount, if any, by which the sum of:
(i) the Project Owner’s Working Interest share of Pre-Development Costs;
(ii) the Project Owner’s Working Interest share of cumulative Resource Project Eligible Costs, other thanTariffs;
(iii) the Project Owner’s share of cumulative Resource Project Eligible Costs for Tariffs as determinedpursuant to Article 22 of the Allocation Agreement;
(iv) cumulative Gross Royalty paid by the Project Owner excepting thereout any amount on account ofGross Royalty paid in kind;
(v) cumulative Net Royalty Return Allowance of the Project Owner to the end of the previous Month; plus
(vi) cumulative Resource Project Eligible Marketing Costs paid by the Project Owner
exceeds the sum of:
(vii) cumulative Gross Transfer Revenue of the Project Owner; plus
(viii) the Project Owner’s Working Interest share of cumulative Resource Project Incidental Revenue.
“Net Royalty Return Allowance Factor” means 0.0117149.
“Net Transfer Revenue” means for a Project Owner during any Month or Period the amount, if any, by which thesum of:
(i) the Gross Transfer Revenue of the Project Owner during the Month or Period; plus
(ii) the Project Owner’s Working Interest share of Resource Project Incidental Revenue during the Month orPeriod; plus
(iii) the ln4cind Value for the Project Owner for the Month or Period;
exceeds the sum of:
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(i) the Project Owner’s Working Interest share of Resource Project Eligible Costs during the Month orPeriod, other than Tariffs;
(ii) the Project Owner’s share of Resource Project Eligible Costs during the Month or Period for Tariffs asdetermined pursuant to Article 22 of the Allocation Agreement; plus
(iii) the Resource Project Eligible Marketing Costs paid by the Project Owner during the Month or Period.
“Newfoundland and Labrador” means the Province of Newfoundland and Labrador.
“Novation Agreement’ means an agreement in the form of Schedule “C”.
“Officer” means the chief financial officer or such other employee of supervisory status at least one level abovethe level of the employee who prepared the information being certified or reconciled as may be acceptable tothe Province.
“Offshore Area” means those submarine areas lying seaward of the low water mark of Newfoundland andLabrador and extending, at any location, as far as:
(I) any line prescribed by regulations made under the Federal Accord Act,
or
(I) where no line is so prescribed at that location, the outer edge of the continental margin or a distance oftwo hundred nautical miles from the baselines from which the breadth of the territorial sea of Canadais measured, whichever is the greater.
“Operating Agreements” means collectively the EL1093 JOA, the PLIOO5 JOA, and the Unit OperatingAgreement.
“Operator’s Agreement” means an agreement in the form of Schedule “F”.
“Operator’s Acknowledgement Agreement” means an agreement in the form of Schedule “G”.
“PLIOOI” means that production licence dated March 21, 1990, numbered 1001 and issued by the Board tothe licensees thereof, and includes all replacements thereof, substitutions therefor and amendments andsuccessors thereto.
“P11001 Hibernia Royalty Agreement” means the agreement dated September 1, 1990 and entitled the“Hibernia Development Project Royalty Agreement”, as amended.
“PLIOO5” means that production licence dated January 14, 2003, numbered 1005 and issued by the Board.
“PLIOO5JOA” means a joint operating agreement applicable to PLIOO5 other than the Unit.
“P11005 License” means, collectively ExxonMobil, Chevron, Suncor, Statoil and Nalcor Oil and anySuccessors which have become bound by this Agreement, and “PLIOO5 Licensee” means any one of theLicensees.
“PLIOO5 Project Owners” means, collectively, Exxon Mobil Partnership, Chevron Partnership, Petro-Ca nadaPartnership, Statoil and Nalcor Oil and “P11005 Project Owner” means any one of the PLIOO5 Project Owners.
“Penalty” or “Penalties” means interest payable pursuant to clause 25.5 of the Agreement.
“Period” means a calendar year except:
(i) for the purposes of calculating Net Royalty or Additional Royalty, with respect to the calendar year inwhich Net Royalty Payout occurs, the time from the beginning of the calendar year to and including thelast day of the Month preceding the Month in which Net Royalty Payout occurs, and the time from andincluding the first day of the Month in which Net Royalty Payout occurs to the end of that calendar year,shall each be considered a separate Period; and
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(ii) for the purposes of calculating Supplementary Royalty or Additional Royalty, with respect to thecalendar year in which Supplementary Royalty Payout occurs, the time from the beginning of thecalendar year to and including the last day of the Month preceding the Month in which SupplementaryRoyalty Payout occurs, and the time from and including the first day of the Month in whichSupplementary Royalty Payout occurs to the end of that calendar year, shall each be considered aseparate Period.
“Person” means a natural person, firm, trust, partnership, association, corporation, unincorporatedorganization, union, government or government agency.
“Petroleum” means Crude Oil and Natural Gas.
“Petroleum and Natural Gas Act” means the Petroleum and Natural Gas Act, R.S.N.L. 1990, c.P-10, andincludes the regulations made and, from time to time, in force under that Act
“Predecessor” means a Project Owner from whom a Successor has acquired a Sold Interest.
“Pre-Development Costs” shall have the meaning set forth in clause 28.1 of this Agreement.
“Prime Rate” means the prime interest rate for Canadian dollar commercial loans as declared from time totime by the principal banker to the Province that is in effect on January 1st, April 1st, July 1st and October 1stof every calendar year, with the rates established on those dates remaining constant for a period of threemonths from the dates indicated.
“Production Start-up” means the day upon which cumulative production of Hibernia Crude EL1093/PLIOO5that is transferred at the Loading Point exceeds three million Barrels.
“Project Lenders” means any Person holding a registered charge or Security Interest upon or in a Licence andin respect of whom a Project Owner has given written notice to the Province that notice is to be given pursuantto clauses 25.7, 25.8 and 25.9 of the Agreement.
“Project Owners” means, collectively, the PLIOO5 Project Owners and the EL1093 Project Owners and “ProjectOwner” means any one of the Project Owners.
“Project Owners’ LiftingAgreement” means the agreement providing for the timing and other conditions uponwhich the share of a Project Owner of the Hibernia Crude EL1093/PLIOO5 will be delivered to the ProjectOwner.
“Project Suspension” means the discontinuance for more than sixty (60) consecutive days of production ofHibernia Crude EL1093/PLIOO5 for a reason other than maintenance, tech nical difficulties, Force Majeure orProject Termination.
“Project Termination” means:
(i) cancellation or expiry of the Licences; or
(ii) a Project Withdrawal by all of the Project Owners in respect of both Resource Projects.
“Project Withdrawal” means a permanent and irrevocable decision, other than a decision for ProjectTermination, by a Project Owner that it will discontinue its obligations to the Resource Projects or either ofthem, which shall be a question of fact which may be submitted to arbitration pursuant to the Agreement if theProvince and the Project Owner do not agree with respect thereto.
“Province” means Her Majesty in Right of the Province of Newfoundland and Labrador.
uprovincial Accord Act” means the Canada-NewfoundlandAtlantic Accord Implementation Newfoundland andLabrador Act, R.S.N.L 1990, c.C-2, and includes the regulations made and, from time to time, in force underthat Act.
“Resource Projects” means collectively Resource Project-EL1093 and Resource Project-PLIOO5 anctResourceProject” means either of them.
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“Resource Project-ELIO93” means that portion of the development project described in a development planapproved by the Board in connection with the development and production of Hibernia Crude EL1093/PLIOO5and produced or deemed to be produced pursuant to EL1093, to the point, but not beyond, where suchHibernia Crude EL1093/PLIOO5 is first loaded into tankers and shall, in any event, include:
(i) any activities which result in Resource Project Incidental Revenues; and
(ii) any other activities permitted by the Agreement.
“Resource Project-PLIOO5” means that portion of the development project described in a development planapproved by the Board in connection with the development and production of Hibernia Crude EL1093/PLIOO5and produced or deemed to be produced pursuant to PL1005 to the point, but not beyond, where such HiberniaCrude EL1093/PLIOO5 is first loaded into tankers and shall, in any event, include:
(i) any activities which result in Resource Project Incidental Revenues; and
(ii) any other activities permitted by the Agreement.
“Resource ProiectAsset” means an asset whose cost is included in the calculation of Resource Project EligibleCosts.
“Resource Project Asset-EL1093” means an asset whose cost is included in the calculation of Resource ProjectEligible Costs-EL1093.
“Resource Project Asset-PLIOO5” means au asset whose cost is included in the calculation of Resource ProjectEligible Costs-PLIOO5.
uResource Project Caoital Activities” means the conduct with respect to a Resource Project of any of:
(a) purchasing, constructing, replacing, assembling, towing out, commissioning, installing, mating andseabed development of property, plant and equipment;
(b) drilling, testing, evaluating, completing, recompleting in a different zone and equipping of production,injection, observation and disposal wells;
(c) engineering and design;
(d) research and development; and
(e) repairs or maintenance the cost of which quality as Resource Project Eligible Capital Costs pursuant toclause 30.11 of the Agreement.
“Resource Project Eligible Capital Cost” means a Resource Project Eligible Cost that relates to any ResourceProject Capital Activities.
“Resource Project Eligible Cost” means a cost which satisfies the requirements of clause 29.1(i) or 29.1(u) ofthe Agreement, which is not disqualified pursuant to clause 29.3 of the Agreement and which is claimed as aResource Project Eligible Cost-EL1093 or Resource Project Eligible Cost-PLIOO5 by the EL1093 Project Ownersor P11005 Project Owners, as the case may be, in all cases subject to the application rules of ARTICLE XXX andthe other provisions of the Agreement.
“Resource Project Eligible Cost-EL1093” means a cost which satisfies the requirements of clause 29.1(i) of theAgreement, which is not disqualified pursuant to clause 29.3 of the Agreement and which is claimed as aResource Project Eligible Cost-EL1093 by the Project Owners, in all cases subject to the application rules ofARTICLE XXX and the other provisions of the Agreement.
“Resource Project Eligible Cost-PLIOO5” means a cost which satisfies the requirements of clause 29.1(u) of theAgreement, which is not disqualified pursuant to clause 29.3 of the Agreement and which is claimed as aResource Project Eligible Cost-PLIOO5 by the Project Owners, in all cases subject to the application rules ofARTICLE XXX and the other provisions of the Agreement.
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‘Resource Project Eligible Marketing Cost” means collectively Resource Project Eligible Marketing Cost-EL1093and Resource Project Eligible Marketing Cost-PLIOO5.
“Resource Project Eligible Marketing Cost-EL1093” means a cost which satisfies the requirements of clause29.2 of the Agreement, which is not disqualified pursuant to clause 29.3(a) of the Agreement and which isclaimed as a Resource Project Eligible Marketing Cost-EL1093 by a Project Owner, in all cases subject to theapplication rules of ARTICLE XXX and the other provisions of the Agreement.
“Resource Project Eligible MarketIng Cost-PLIOO5” means a cost which satisfies the requirements of clause29.2 of the Agreement, which is not disqualified pursuant to clause 29.3(b) of the Agreement and which isclaimed as a Resource Project Eligible Marketing Cost-PLIOO5 by a Project Owner, in all cases subject to theapplication rules of ARTICLE XXX and the other provisions of the Agreement.
“Resource Project Eligible Operating Cost” means a Resource Project Eligible Cost that does not relate to anyResource Project Capital Activities.
“Resource Prolect Incidental Revenue” means collectively the Resource Project Incidental Revenue-EL1093and Resource Project Incidental Revenue-PLIOO5.
“Resource Project Incidental Revenue-E11093” means revenue received or deemed or declared, pursuant tothe Agreement or the Allocation Agreement, received by the EL1093 Project Owners or the Resource ProjectOperator-EL1093 on behalf of the EL1093 Project Owners from the following;
(a) sale or other disposal of Resource Project Assets-EL1093;
(b) rental or lease or other use of Resource Project Assets-EL1093, except as may be otherwise agreedpursuant to clause 17.4(i) of the Agreement;
(c) tariffs, fees or other charges paid to EL1093 Project Owners for use of the Resource Project Assets-1093;
(d) proceeds received pursuant to insurance policies whose premiums were included as a ResourceProject Eligible Cost-EL1093 or a Resource Project Eligible Marketing Cost-EL1093 and the proceedswere not used to pay for costs which are:
(i) except for the operation of item (u) of clause 29.3 of the Agreement, Resource Project EligibleCosts-EL1093 or Resource Project Eligible Marketing Costs-EL1093; or
(ii) relate to the risks for which such insurance policies provide coverage;
(e) salvage and similar proceeds relative to the Resource Project Assets-EL1093 or assets of Personsother than the EL1093 Project Owners;
(f) any amounts required to be included as Resource Project Incidental Revenue-EL1093 pursuant toclause 36.2 of the Agreement;
() any allocation of Unit Incidental Revenue to EL1093 pursuant to Article 20 of the AllocationAgreement; and
(h) such other revenue received on account of the Resource Project-EL1093 as the Province mayreasonably declare, after discussion with the EL1093 Project Owners, to be Resource Project IncidentalRevenue-EL1093.
“Resource Project Incidental Revenue-PLIOO5” means revenue received or deemed or declared, pursuant tothe Agreement or the Allocation Agreement, received by the PLIOO5 Project Owners or the Resource ProjectOperator-PLIOO5 on behalf of the P11005 Project Owners from the following;
(a) sale or other disposal of Resource Project Assets-PLIOO5;
(b) rental or lease or other use of Resource Project Assets-PLIOO5, except as may be otherwise agreedpursuant to clause 17.4(u) of the Agreement;
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(C) tariffs, fees or other charges paid to PLIOO5 Project Owners for use of the Resource Project Assets-1005;
(d) proceeds received pursuant to insurance policies whose premiums were included as a ResourceProject Eligible Cost-PLIOO5 or a Resource Project Eligible Marketing Cost-PLIOO5 and the proceedswere not used to pay for costs which are:
(1) except for the operation of item (u) of dause 29.3 of the Agreement, Resource Project EligibleCosts-PLIOO5 or Resource Project Eligible Marketing Costs-PLIOO5; or
(ii) relate to the risks for which such insurance policies provide coverage;
(e) salvage and similar proceeds relative to the Resource Project Assets-PLIOO5 orassets of Persons other than the PLIOO5 Project Owners;
(f) any amounts required to be included as Resource Project Incidental Revenue-PLIOO5 pursuant toclause 36.2 of the Agreement;
(g) any allocation of Unit Incidental Revenue to PLIOO5 pursuant to Article 20 of the AllocationAgreement; and
(h) such other revenue received on account of the Resource Project-PLIOO5 as the Province mayreasonably declare, after discussion with the PLIOO5 Project Owners, to be Resource Project IncidentalReven ue-PL1005.
“Resource Project Operators” means collectively the Resource Project Operator-EL1093 and the ResourceProject Operator-PLIOO5, and “Resource Project Operator” means either of the Resource Project Operators.
“Resource Project Operator-EL1093” means any Person which has been designated by the EL1093 ProjectOwners to operate a Resource Project-EL1093 as agent on behalf of the EL1093 Project Owners.
“Resource Project Operator-PLIOO5” means any Person which has been designated by the P11005 ProjectOwners to operate a Resource Project-PLIOO5 as agent on behalf of the PLIOO5 Project Owners.
“Return Allowance Suspension” means:
during the time prior to Production Start-up:
(a) when the Project Owners advise the Province that they have instructed a Resource ProjectOperator or Unit Operator not to undertake any incremental commitments; or
(b) when design, construction or drilling work to the extent practical has been stopped;
and
during the time after Production Start-up:
(a) when the Project Owners advise the Province that they have instructed a Resource ProjectOperator or Unit Operator to cease production; or
(b) when there has been no significant activity on the Resource Projects or no production from theResource Projects for a period of 60 consecutive days.
“Royalty Share” means Gross Royalty, Net Royalty, Supplementary Royalty, Additional Royalty, interest,Penalties and other amounts payable to the Province pursuant to this Agreement and the AllocationAgreement.
“Sale Point” means:
(a) the point at which title to Hibernia Crude EL1093/PL1005 of a Project Owner is passed to a Personwho is not that Project Owner; or
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(b) where title to Hibernia Crude EL1093/PLIOO5, prior to being refined or finally consumed, does notpass to a Person who is not that Project Owner, the point which is the entry valve into the refinery orconsuming facility.
“Sale Price” means, with respect to each transfer at the Loading Point by a Project Owner of a Barrel ofHibernia Crude EL1093/PLIOO5, the actual sale price received therefor at the Sale Point subject to theProvince’s right of redetermination or recalculation of the Sale Price in accordance with the provisions of theAgreement and subject to the Project Owner’s right to submit the Sale Price to be determined by arbitration inaccordance with the provisions of the Agreement.
“Sanction” means the final approval of the Project Owners to fund the engineering, procurement andconstruction of the subsea template and associated subsea facilities to be installed in connection with thedevelopment of the Unit as described in the Approved DPA, in accordance with the terms of the Unit OperatingAgreement.
“Security” shall have the meaning provided for in clause 13.1 of this Agreement.
“Security Holder Agreement” means an agreement in the form of Schedule “D”.
“Security Interest” means any assignment by way of security (including, without limitation, any assignment ofthe right to receive income), mortgage, charge, hypothec, pledge, lien, encumbrance, conditional sale or otherretention of title, or security interest of any kind or nature whatsoever, howsoever created or arising, whetherabsolute or contingent, fixed or floating, perfected or not, but does not include any right of set-off.
“Service Provider” means the Service Provider under the FOSA.
“Shuttle Tanker” shall have the meaning set out in the Allocation Agreement.
“Sold Interest” means any part of the Working Interest in a Resource Project or a Licence sold by a ProjectOwner.
“Solution Gas” means Natural Gas which is in solution with Hibernia Crude EL1093/PLIOO5 under reservoirconditions and which is produced in association with Hibernia Crude EL1093/PLIOO5.
“SubsidIary” of a corporation (the “parent”) means a corporation (the “subject corporation”):
(a) that is controlled in fact by the parent or in respect of which the parent otherwise possesses the ability(whether or not exercised) to control or direct, directly or indirectly, its policies, business and affairs,including by election to its board of directors; or
(b) in respect of which the parent, the parent and any other corporation each of which is a Subsidiary ofthe parent, or any other corporation, each of which is a Subsidiary of the parent, owns beneficially,directly or indirectly, at least fifty per cent (50%) of the voting securities of the subject corporation orsuch securities of the subject corporation as are sufficient to elect a majority of the board of directorsof the subject corporation.
“Successor” means a Person who has acquired from a Project Owner any part of the Working Interest in aResource Project or a Licence to which the Project Owner was entitled.
“Supplementary Royalty” means the royalty described in ARTICLE XXI of the Agreement.
“Supplementary Royalty Index” means the Consumer Price Index for Canada (All Items) published by StatisticsCanada, which on the date of this Agreement is publication number 62-OOI-X.
“Supplementary Royalty Payout” means, for a Project Owner, the first point in time when the sum of:
(i) cumulative Gross Transfer Revenue of the Project Owner; plus
(ii) the Project Owner’s Working Interest share of cumulative Resource Project Incidental Revenue
equals the sum of:‘
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(iii) the Project Owner’s Working Interest share of Pre-Development Costs;
(iv) the Project Owner’s Working Interest share of cumulative Resource Project Eligible Costs, other thanTariffs;
(v) the Project Owner’s share of cumulative Resource Project Eligible Costs for Tariffs as determinedpursuant to Article 22 of the Allocation Agreement;
(vi) cumulative Gross Royalty paid by the Project Owner excepting thereout any amount on account ofGross Royalty paid in kind;
(vii) cumulative Net Royalty paid by the Project Owner excepting thereout any amount on account of NetRoyalty paid in kind;
(viii) cumulative Supplementary Royalty Return Allowance to which the Project Owner is entitled;
(ix) cumulative Resource Project Eligible Marketing Costs paid by the Project Owner; plus
(x) cumulative Additiona Royalty paid by the Project Owner, excepting thereout any amount on account ofAdditional Royalty paid in kind.
Supplementary Royalty Return Allowance” means, for a Project Owner, for any Month, the product of theSupplementary Royalty Return Allowance Factor and the amount, if any, by which the sum of:
(i) the Project Owner’s Working Interest share of Pre-Development Costs;
(ii) the Project Owner’s Working Interest share of cumulative Resource Project Eligible Costs, other thanTariffs;
(iii) the Project Owner’s share of cumulative Resource Project Eligible Costs for Tariffs as determinedpursuant to Article 22 of the Allocation Agreement;
(iv) cumulative Gross Royalty paid by the Project Owner excepting thereout any amount on account ofGross Royalty paid in kind;
(v) cumulative Net Royalty paid by the Project Owner excepting thereout any amount on account of NetRoyalty paid in kind;
(vi) cumulative Supplementary Royalty Return Allowance of the Project Owner to the end of the previousMonth;
(vii) cumulative Resource Project Eligible Marketing Costs paid by the Project Owner; plus
(viii) cumulative Additional Royalty paid by the Project Owner, excepting thereout any amount on account ofAdditional Royalty paid in kind
exceeds the sum of:
(ix) cumulative Gross Transfer Revenue of the Project Owner; plus
(x) the Project Owner’s Working Interest share of cumulative Resource Project Incidental Revenue.
Supplementarv Royalty Return Allowance Factor” means, for any Month, an amount which when added to 1.0and raised to the power of 12 yields the sum of 1.18 plus the percentage increase or decrease, expressed as adecimal, in the Supplementary Royalty Index for the Month which is two (2) Months prior to the Month forwhich the calculations are being made from the Supplementary Royalty Index for the same Month in thepreceding calendar year.
Administrators shall have the meaning set out in the Allocation Agreement.
Tanker Cost Aggregator” shall have the meaning set out in the Allocation Agreement.
“Tariff Administrator” shall have the meaning set out in the Allocation Agreement.jj
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92
“Tariff Agreement” means the agreement made amongst HMDC and the Project Owners entitled the “TariffAgreement,” effective July 15, 2009.
“Tariffs” means any tariff, fee or other charge paid under the Tariff Agreement.
“Temporary Replacement Tanker” shall have the meaning set out in the Allocation Agreement.
“Transfer Point” means the point at which Crude Oil passes the flange where the pipeline or the delivery hoseof the offshore loading system connects with the transportation vessel’s intake pipe.
“Transfer Price” means, in any Month, for a Project Owner, the quotient obtained by dividing the ProjectOwner’s Gross Transfer Revenue for the Month (notwithstanding the provisions of clause 30.17 of theAgreement, excluding any payments received by the Project Owner during the Month relative to the sale ofHibernia Blend which was not delivered during the Month or a previous Month and, further, excluding anyrefunds of any such payments) by the volume of Hibernia Blend transferred by or to the account of the ProjectOwner into marine tankers at the Loading Point (not including any volume of Flibernia Blend taken in kind bythe Province in respect of that Project Owner and, further, not including any volume of Hibernia Blend for whichthe Project Owner received payment in a previous Month and which payment was taken into account forcalculation of the Royalty Share of the Project Owner for a previous Month) and the revenue from which hasbeen included in the calculation of Gross Transfer Revenue. In the event that there is no Transfer Price for aProject Owner for any Month then, for the purposes of the Agreement, the Transfer Price for the Project Ownerfor that Month shall be the Transfer Price for the most recent Month for which a Transfer Price for the ProjectOwner was established as a result of the sale of Hibernia Blend by the Project Owner.
“Transshipment Operator” shall have the meaning set out in the Allocation Agreement.
“!,ni” shall have the meaning set out in the Allocation Agreement.
“Unit Account” means the account maintained by the Unit Operator in accordance with the provisions of theAllocation Agreement to record charges, expenditures, receipts and credits.
“Unit Incidental Revenue” shall have the meaning set out in the Allocation Agreement.
“Unit Operating Agreement” means the agreement made among the Project Owners entitled the “UnitOperating Agreement”, effective July 15, 2009.
“Unit Operator” shall have the meaning set out in the Allocation Agreement.
“Unit Production” shall have the meaning set out in the Allocation Agreement.
“Unit Project” means the development of the Unit as described in a development plan approved pursuant to theAccord Act.
“United States Dollars or “U.S.$” means a dollar of the lawful money of the United States of America.
“WTI Price” means for any particular day, the average of the specified range of prices per barrel of West TexasIntermediate light sweet crude oil for the Prompt Delivery Month on that day, stated in United States Dollars,published under the heading “Key Benchmarks” in the issue of Platt’s Crude Oil Marketwire that reports priceseffective on that day for the prompt delivery month. Prompt Delivery Month is defined as the first month inwhich the delivery of the contracted WTI or equivalent crude volumes is required. If Platt’s Marketwire is nolonger available, WTI Price shall mean the specified price per barrel of West Texas Intermediate light sweetcrude oil as set forth in any successor or replacement publication that is widely used and generally accepted bythe international petroleum industry. If there is no price for West Texas Intermediate light sweet crude oilavailable or there is no such publication, WTI Price shall mean the comparable quality light sweet crude oilselected as a reasonable replacement in terms of quality and market for WTI as selected by the Province, andupon notice to the Project Owners that replacement shall apply as if it was WTI under this provision.
“Whiffen Head Transshipment Terminal” has the meaning set forth in the Allocation Agreement.
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“Wilful and Deliberate Misconduct” means deliberate acts or deliberate omissions taken or not taken, as thecase may be, by the personnel referred to in item (m)of clause 29.3, knowing and appreciating that such actsor omissions were not in accordance with good oilfield practice but were nevertheless deliberately engaged inor deliberately omitted, with disregard to the consequences of same. For greater certainty, if such personnelfail to obey or comply with any order, directive or other notification which:
(i) is given by a government, government department or agency, the Board or any court, provided in allcases that it is authorized by law to make such order, directive or notification; and
(ii) has been delivered in writing by a person legally empowered and authorized to do so,
then the failure to so obey or comply within a reasonable time thereafter shall constitute Wilful and DeliberateMisconduct; provided, however, that if any such order, direction or notification is made the subject of anappeal, stay or dispute in accordance with applicable law or an injunction, then the reasonable time allowedfor compliance shall commence:
(iii) in the case of an order, direction or notification confirmed in full upon conclusion of such appeal, stay,dispute or injunction, then to the extent confirmed, from the time of the original order, direction ornotification; or
(iv) in the case of an order, direction or notification varied upon such appeal, stay, dispute or injunction,then to the extent varied, from the time of the decision rendered upon conclusion thereof.
“Working lnterest-EL1093” when used in relation to EL1093, the Resource Project-EL1093 or the ResourceProject Assets-EL1093, means an undivided interest therein which entitles the Person beneficially entitledthereto to a share in the revenues howsoever derived therefrom and is chargeable with and that Person isobligated to pay or bear a corresponding portion of the costs of acquisition, operation and disposition thereof.
“Working Interest-PLiOO5” when used in relation to PLIOO5, the Resource Project-PLIOO5, or the ResourceProject Assets-PLIOO5, means an undivided interest therein which entitles the Person beneficially entitledthereto to a share in the revenues howsoever derived therefrom and is chargeable with and that Person isobligated to pay or bear a corresponding portion of the costs of acquisition, operation and disposition thereof.
“Working Interest” when used in relation to a Licence, a Resource Project, or any Resource Project Assets,means an undivided interest therein which entitles the Person beneficially entitled thereto to a share in therevenues howsoever derived therefrom and is chargeable with and that Person is obligated to pay or bear a corresponding portion of the costs of acquisition, operation and disposition thereof.
(1
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94
SCHEDULE ‘B” TO THE AGREEMENT
This Schedule Intentionally Left Blank
(/7
95
SCHEDULE “C” TO THE AGREEMENT
ASSIGNMENT AND NOVATION AGREEMENT
THIS AGREEMENT made this
_____
day of
_______________ _____
A M 0 N G:
a body corporate, having officesat the City of Calgary, in theProvince of Alberta, Canada
(herein referred to as “Licensee”)
- and-
a general partnership formed andexisting under the laws of theProvince of Alberta and having offices Inthe City of Calgary, in the Province ofAlberta, Canada
(herein referred to as “Partnership”)
-and-
a body corporate, having offices atthe City of
____________________,
inthe
_________
of
____________
(herein referred to as “Assignee”)
-and-
The parties, other than the Assignorand Assignee, executing a counterpartof this Assignment and NovationAgreement
(herein collectively referred to as “Third Party”)
WHEREAS “Licensee” and “Partnership” are herein referred to as “Assignor”; and —
WHEREAS Assignor and Third Party are parties to a Royalty Agreement dated
__________,
2010 adi p
A
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96
Allocation Agreement dated
_______,
2010 relative to the royalty payable on crude oil produced pursuant toP11005 and EL1093 issued by the Canada-Newfoundland and Labrador Offshore Petroleum Board (whichagreements, as may have been amended, are herein referred to herein collectively as the ‘RoyaltyAgreement”); and
WHEREAS Assignor has assigned to Assignee all of the interest of Assignor in and under the RoyaltyAgreement (the interest in the Royalty Agreement assigned by Assignor to Assignee being herein referred to asthe “Assigned Interest”).
NOW THEREFORE in consideration of the premises hereto and the mutual covenants and agreements hereinset forth, the parties hereto agree as follows:
1. DefInitions
The words and phrases in this Assignment and Novation Agreement shall, unless otherwise definedherein, have the same meanings as such words and phrases have in the Royalty Agreement.
2. Assignment by Assignor
Assignor does hereby assign, set over, transfer and convey the Assigned Interest unto Assigneetogether with all benefit and advantage to be derived therefrom, to have and to hold the same unto Assigneeabsolutely.
3. Accentance by Assignee
Assignee hereby accepts the assignment from Assignor set forth in Clause 2 hereof and covenants andagrees with the Assignor and Third Party that it shall at all times from and after the date hereof, be bound by,observe and perform all of the terms and provisions to be observed and performed by Assignor under theRoyalty Agreement to the same extent as if Assignee had been a party thereto in the place and stead ofAssignor.
4. Consent and Agreement of Third Party
Third Party does hereby:
(I) consent to the assignment by Assignor to Assignee of the Assigned Interest;
(ii) release and discharge Assignor of and from the observance and performance of the covenants,agreements and obligations on the part of the Assignor to be observed and performed underthe Royalty Agreement in respect of the Assigned Interest from and after the date hereofprovided, however, that nothing herein contained shall be construed as a release of theAssignor from any obligation or liability under the Royalty Agreement which accrued prior tothe date hereof; and
(iii) agree that from and after the date hereof Assignee shall, in accordance with the provisions ofthe Royalty Agreement, be entitled to hold and enforce all of the privileges, rights and benefitsof Assignor under the Royalty Agreement in respect of the Assigned Interest to the same extentas though and to the intent and purpose that Assignee had been a party thereto in the place ) L
and stead of Assignor. 9
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97
5. Release
In consideration of the Province executing this Assignment and Novation Agreement, theAssignor does hereby release and absolutely discharge the Province of and from any and all claims,actions, suits, demands, losses, costs, damages and expenses, including, without limitation, legalexpenses, of whatsoever nature or kind, which the Assignor now has or may hereafter have or incurs,directly or indirectly, by reason of, or In any way relating to the Province accepting and dealing, oragreeing to accept and deal, with Assignee as a party to the Royalty Agreement in respect of theAssigned Interest in the place and stead of Assignor.
6. Counterparts
This Assignment and Novation Agreement may be executed in as many counterparts as arenecessary and, when a counterpart has been executed by each party hereto, all counterparts togethershall constitute one agreement.
7. Address of Assignee
The address of Assignee for notices under the Royalty Agreement shall be the address set forthbelow, namely:
8. Agent for Service for Assignee
For the purposes of clause 37.3 of the Royalty Agreement the person whose name is set forthbelow to be the agent of Assignee to receive on its behalf service of all and any papers which may beserved in any legal proceedings relative to the Royalty Agreement which involve the Province, namely:
__________
Newfoundland and Labrador
Canada
9. Governing Law
This Assignment and Novation Agreement shall be governed by, and construed in accordance 4h, thelaws in force in Newfoundland and Labrador. Ii)
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98
10. Inurement
This Assignment and Novation Agreement shall inure to the benefit of and be binding upon the partieshereto and their respective successors and assigns.
IThe remainder of this page has been intentionally left blank.]
/‘
99
IN WITNESS WHEREOF each of the parties to this Agreement have caused this Assignment and NovationAgreement to be executed by their officers or representatives duly authorized in that behalf on the date firstabove written.
HER MAJESTY INAND LABRADOR
Represented by:
RIGHT OF NEWFOUNDLAND
(* )
(* )
EXXONMOBIL CANADA LTD.
Per:
Per:
(* )
(* )
EXXON MOBIL HIBERNIALTD.
HOLDING COMPANY
Per:
Per:
(* )
(* )
CHEVRON CANADA LIMITED
Per:(*
Per:(*
)
SUNCOR ENERGY INC.
)
Per
Per:
(* )
(* )
MURPHY ATLANTIC OFFSHORE OIL COMNY jLLTD. N))\
‘1it V /I,
,3 ;-;-
Name and Title of oflcer
signing to he inserted heforc
execution
100
71
Per:(* )
Per:(* )
CANADA HIBERNIA HOLDING CORPORATION
Per:(* )
Per:(* )
STATOIL CANADA LTD.
Per:(* )
Per:(* )
(* )
Name and Title o officer
signing to be inserted heftre
execution
NALCOR ENERGY - OIL AND GAS INC.
Per:
Per:(* )
EXXONMOBIL CANADA PROPERTIES, by itsPartners in their capacity as partners and not inany other capacity:
ExxonMobil Canada Ltd.
Per:(* )
Per:(* )
ExxonMobll Canada Hibernia Company Ltd.
Per:
Per:
(* )
)
101
CHEVRON CANADA RESOURCES, by its Partnersin their capacity as partners and not in anyother capacity:
Chevron Canada Limited
Per:(* )
Per:(* )
PETRO-CANADA HIBERNIA PARTNERSHIP, byits Partners in their capacity as partners andnot in any other capacity:
* Name and title of officer signing to beinserted before execution
**Name of Assignee to be inserted before execution
Suncor Energy Inc.Per:
Per:
(* )
(* )
Comoletion Instructions
1. Where a party to the Royalty Agreement is a corporation and that corporation is not an Affiliate of apartnership that is also a party to the Royalty Agreement, then any Assignment and Novation Agreementprepared for such corporation as Assignor would:
(i) refer to such corporation as “Assignor” and not as “Corporation”;
(ii) the party to the Assignment and Novation agreement referred to as “Partnership” would bedeleted from page 1 of the Assignment and Novation Agreement; and
(iii) the first recital would be deleted.
2. Where a Project Owner and its Affiliated Licensee sell part only of their interest in the Project, then thepercentage of the Assignor’s Working Interest being conveyed by the Assignor to the Assignee shall besubstituted for the word “all” in the third recital of the Assignment and Novation Agreement.
7,fL 2
102
SCHEDULE “D” TO THE AGREEMENT
SECURITY HOLDER AGREEMENT
THIS AGREEMENT made this
______
day of
____________, __________
AMONG:
________________________
a body corporate, having offices at the City of
_______,inthe __________
of
___________
(herein referred to as the “Security Holder”)
-and —
HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR
(herein referred to as the “Province”)
-and —
The party or parties executing this Agreementas Grantor
(herein referred to as the “Grantor”)
WHEREAS the Province and the Grantor (which term shall include the plural if more than one Person is theundersigned Grantor) are parties to a Royalty Agreement dated
______________,2010
relative to the royaltiespayable on crude oil produced pursuant to PLIOO5 and EL1093 issued by the Canada-Newfoundland andLabrador Offshore Petroleum Board (which agreement, as may have been amended, is herein referred to asthe “Royalty Agreement”); and
WHEREAS Grantor has granted to and in favour of the Security Holder a Security Interest in any or all of theGrantor’s Working Interest in the Licences or any or all of its interest in the Charged Premises or both (suchSecurity Interest and the documents and instruments evidencing same being herein referred to as the“Security”);
NOW THEREFORE in consideration of the premises, one dollar ($1.00) and other good and valuableconsideration (receipt whereof is hereby acknowledged) the parties hereby covenant and agree as follows:
1. Definitions
The words and phrases in this Agreement (including the recitals hereto) shall, unless otherwise definedherein, have the same meanings as such words and phrases have in the Royalty Agreement.
2. Subordination
(a) The Security Holder hereby agrees that:
(i) its claim for payment by the Grantor out of any of the Charged Premises or anyproceeds thereof or therefrom; and
(ii) the Security and its rights thereunder;
are hereby expressly subordinated and postponed to the Security Interests rante7the
‘3 ‘V
103
Grantor to the Province under the Royalty Agreement, the Provinc&s entitlement to paymentout of any of the Charged Premises or any proceeds thereof or therefrom of the Royalty Sharepayable by such Grantor and the Province’s rights under Articles XIII and XXII of the RoyaltyAgreement.
(b) Upon realization by the Security Holder upon any or all of the Security which does not result inan assignment or transfer of, or vesting of title to, the Grantor’s Working Interest in theLicences, and until such time as such assignment or transfer or vesting of title occurs, to theextent that the Security Holder receives any payment pursuant to such realization from anyproceeds due or owing to the Grantor from or in respect of Grantor’s share of Hibernia CrudeEL1093/PL1005, the Province shall be entitled, both before and after the appointment of anyreceiver in respect of the Security, to receive payment of the Royalty Share payable by theGrantor from or in respect of such Hibernia Crude EL1093/PLIOO5 before the Security Holderis entitled to appropriate any such proceeds to its own account. For greater certainty theRoyalty Share payable by the Grantor as aforesaid shall include any Royalty Share payable forany Hibernia Crude EL1093/PLIOO5, the proceeds of which have been received bythe SecurityHolder after such date of enforcement, and which may be payable by the Grantor as a result ofany redetermination, recalculation, audit, annual review and reconciliation or arbitrationpursuant to the provisions of the Royalty Agreement. In addition the Security Holderacknowledges and recognizes the right of the Province, at anytime, including during any periodof realization by the Security Holder on any Security, to realize upon any Security Interestgranted to the Province, to take in kind and dispose of the Royalty Share payable in respect ofthe Grantor’s share of Hibernia Crude EL1093/PLIOO5 pursuant to the provisions of theRoyalty Agreement and to otherwise deal with such Security Interest and the Grantor (includingthe granting of waivers, extensions and compromises) as the Province sees fit, all withoutnotice or account to the Security Holder and without prejudice to its rights and benefitshereunder.
(c) If the Security Holder shall receive any amount in respect of the Security before the Provincereceives payment of the Royalty Share as aforesaid, such amount, to the extent necessary topay such Royalty Share, shall be held in trust by the Security Holder and, after deducting itsreasonable costs of collection, shall be forthwith paid over to the Province. The foregoing trustobligation of the Security Holder shall only be with respect to proceeds received by a SecurityHolder after such date of enforcement.
(d) The Security Holder hereby postpones all rights of subrogation which it may acquire in respectof this Agreement or the provisions of Articles XIII or XXII of the Royalty Agreement as a resultof payments received by the Province from or instead of the Security Holder on account of theprovisions of this Agreement to payment in full of the Royalty Share payable by the Grantor tothe Province.
(e) The Province acknowledges that, to the extent the Security Holder makes any payment to theProvince of any Royalty Share payable by the Grantor, the Security Holder shall be subrogatedto the Security Interest granted to the Province by the Grantor; provided however, suchsubrogated rights shall at all times be postponed as provided in clause 2(d) hereof.
(f) The Security Holder will, as soon as is reasonably practicable, give written notice to theProvince of any proposed assignment or transfer of any of the Grantor’s Working Interest in theLicences as a result of any realization of any Security.
3. Application of Royalty Agreement
(a) Upon realization by the Security Holder on any Security which results in an assignment ortransfer of, or vesting of title to, all or any of the Grantor’s Working Interest in the Licences tothe Security Holder, the Security Holder
104
(I) will not register such assignment or transfer under the Federal Accord Act until theProvince has received payment of all amounts for which the Security Holder is liablepursuant to the provisions of clause 3(a)(ii) below;
(ii) will be liable to the Province for the payment of that proportion of the Royalty Sharepayable by the Grantor to the Province relative to the period prior to such assignmentor transfer in the same manner and to the same extent as would a Successor to suchGrantor pursuant to the provisions of clause 16.12 of the Royalty Agreement if suchGrantor were a Predecessor and such Working Interest to be assigned or transferredwere a Sold Interest. For the purposes of determining the extent of such liability, theproportion of the Royalty Share payable shall be the same proportion as the WorkingInterest to be assigned or transferred is of the total Working Interest of the Grantor,and the Security Holder shall be entitled to request a Royalty Statement from theProvince and the provisions of clause 16.12 shall apply mutatis mutandis; and
(iii) will, without further act or formality, at all times from and after the date thereof, withrespect to the proportion of the Working Interest acquired by it, be entitled to enjoy allbenefit and advantage to be derived from, and be bound by, observe and perform all ofthe terms and provisions to be observed and performed by the Grantor under, theRoyalty Agreement (including, without limitation, the provisions of Article XIII andclause 13.8 thereof) to the same extent as if the Security Holder had been a partythereto in the place and stead of the Grantor. The Security Holder shall execute orcause to be executed all deeds and documents and shall do or cause to be done allthings necessary for confirming the Security Interests granted to the Province underArticle XIII of the Royalty Agreement.
(b) Upon realization by the Security Holder upon any Security which results in an assignment ortransfer of, or vesting of title to, the Grantor’s Working Interest in the Licences to a Personother than the Security Holder, the Security Holder will, prior to or contemporaneously withsuch Assignment, transferor vesting, cause such Person to execute and deliver to the Provincean agreement pursuant to which such Person shall covenant and agree that it:
(i) will not register such assignment or transfer under the Federal Accord Act until theProvince has received payment of all amounts for which such Person would be liablepursuant to the provisions of clause 4(a)(ii) below:
(ii) will be liable to the Province for the payment of that proportion of the Royalty Sharepayable by the Grantor to the Province relative to the period prior to such assignmentor transfer in the same manner and to the same extent as would a Successor to suchGrantor pursuant to the provisions of clause 16.12 of the Royalty Agreement if suchGrantor were a Predecessor and such Working Interest to be assigned or transferredwere a Sold Interest. For the purposes of determining the extent of such liability, theproportion of the Royalty Share payable shall be the same proportion as the WorkingInterest to be assigned or transferred is of the total Working Interest of the Grantor,and such Person shall be entitled to request a Royalty Statement from the Provinceand the provisions of clause 16.12 shall apply mutatis mutandis; and
(iii) will, without further act or formality, at all times from and after the date thereof withrespect to the proportion of the Working Interest acquired by it, be entitled to enjoy allbenefit and advantage to be derived from, and be bound by, observe and perform all ofthe terms and provisions to be observed and performed by the Grantor under, theRoyalty Agreement (including, without limitation, the provisions of Article XIII andclause 13.8 thereof) to the same extent as if such Person had been a party thereto inthe place and stead of the Grantor and further, that it shall execute or cause to beexecuted all deeds and documents and shall do or cause to be done aI things
I
i05
necessary for confirming the Security granted to the Province under Article XIII of theRoyalty Agreement.
Upon delivery of such agreement executed by such Person, the Province agrees to execute suchagreement.
4. Substitution for Grantor
(a) Upon realization by the Security Holder upon any of the Security which results in an assignmentor transfer of, or vesting of title to, all or any part of the Grantor’s Working Interest in theLicences, the Grantor hereby agrees:
(i) to the substitution and replacement of Grantor by the Security Holder as a party to theRoyalty Agreement with respect to all or such part of Grantor’s Working Interest inthe Licences in the circumstances set forth in clause 3(a) above, and
(ii) to the substitution and replacement of Grantor by any other Person as a party to theRoyalty Agreement with respect to all or such part of Grantor’s Working Interest inthe Licences in the circumstances set forth in clause 3(b) above.
5. Assignment of Security
The Security Holder will not assign or transfer the Security, or any party thereof, to any Person unlesssuch Person shall have first assumed the obligations of the Security Holder hereunder and agreed to be boundby the provisions hereof.
6. Counterparts
This Agreement may be executed in one or more counterparts, all of which when executed shallconstitute one and the same agreement.
7. Address of Security Holder
The address of the Security Holder for notices under the Royalty Agreement shall be the address setforth below, namely:
8. Agent for Service for Security Holder
For the purpose of clause 38.3 of the Royalty Agreement the person whose name is set forth below isto be the agent of the Security Holder to receive on its behalf service of all and any papers which may be servedin any legal proceedings relative to the Royalty Agreement which involve the Province, namely:
/
106
________
Newfoundland and Labrador
Canada
9. Governing Law
This Agreement shall be governed by, and construed in accordance with, the laws in force inNewfoundland and Labrador.
10. Inurement
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respectivesuccessors and assigns.
11. Further Assurances
The Security Holder shall, at its expense, make, execute and deliver or cause to be made, executed anddelivered all such documents and instruments and do or cause to be done all such things as the Province mayat any time and from time to time reasonably require for the purposes of giving effect to this Agreementincluding, without limitation, executing postponements of the Security Holder’s rights.
[THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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107
IN WITNESS WHEREOF each of the parties to this Agreement have caused this Agreement to be executed bytheir officers or representatives duly authorized in that behalf on the date first above written.
Grantor: Security Holder:
*
Per:
Per:
(** )
(** )
Per:
_______________
(** )Per:
_______________
(** )
HER MAJESTY INLABRADOR
Represented by:
RIGHT OF NEWFOUNDLAND AND
(* )
(* )
(Instructions on the following page)
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108
* Name of Security Holder to be inserted before execution
** Name and title of officer signing to be inserted before execution
*** Name of Grantor to be inserted before execution
Completion Instructions
1. Where the Grantor is both the Project Owner and the Licensee which is an Affiliate of that ProjectOwner, then the reference on the first page to the party of the third part which defines Grantor shouldbe a reference to both the Project Owner and Licensee.
2. Where the Grantor has granted to the Security Holder a Security Interest on only part of the ChargedPremises, then the reference in the second recital to “the Charged Premises” should be changed to areference to the specific properties, assets, rights and things on which such Security Interest wasgranted.
3. Where the Grantor has not granted to the Security Holder a Security Interest on any of its WorkingInterest in the Licences, then the reference in the second recital to “on all of its Working Interest in theLicences and” should be deleted and where the Grantor has not granted to the Security Holder aSecurity Interest on any of its interest in the Charged Premises, then the reference in the second recitalto “and on all of its interest in the Charged Premises” should be deleted.
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109
SCHEDULE “E” TO THE AGREEMENT
CONFIDENTIALITY DECLARATION
THIS INDENTURE dated this
______
day of
_______________
IN FAVOUR OF:
a body corporate, having officesat the City of
__________,
in the
___________of_________________________
(herein referred to as ‘Project Owner”)
HER MAJESTY IN RIGHT OFNEWFOUNDLAND AND LABRADOR
(herein referred to as “the Province”)
WHEREAS the Province, the Project Owner and others are parties to a Royalty Agreement dated
_______________,2010
relative to the royalty payable on crude oil produced pursuant to PLIOO5 and EL1093issued by the Canada-Newfoundland and Labrador Offshore Petroleum Board (which agreement, as may havebeen amended, is herein referred to as the “Royalty Agreement”); and
WHEREAS the undersigned is an arbitrator for the purposes of the Royalty Agreement; and
WHEREAS the Royalty Agreement provides that, prior to the provision to an arbitrator of any information for thepurposes of an arbitration, the arbitrator shall address, execute and deliver to each party to the arbitration aConfidentiality Declaration in the form hereof.
NOW THEREFORE, in consideration of the appointment of the undersigned as an arbitrator under the RoyaltyAgreement and of the fees to be received by the undersigned for acting as an arbitrator under the RoyaltyAgreement, the undersigned does hereby covenant and agree with the Project Owner and the Province that theundersigned shall at all times keep confidential all information received from the Project Owner and theProvince in the course of the arbitration except for information which:
(I) is required to be produced in court;
(ii) is in the public domain at the time it is obtained by the undersigned through no wrongful act ofthe undersigned;
(iii) becomes in the public domain after it has been obtained by the undersigned through no faultof the undersigned;
(iv) is otherwise in the possession of the undersigned prior to the time it is obtained in the courseof the arbitration through no wrongful act of the undersigned and is not then held in confidenceby the undersigned;
(v) is obtained by the undersigned from anyone not known to the undersigned to be obligatedkeep the information obtained by the undersigned confidential; or
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(vi) the undersigned is required to disclose by law, by any court having jurisdiction or by any bodyconstituted by law which has been authorized by law to require such disclosure, but in eachcase only to the extent so requested and required.
Delivered this
_____
day of
____________, _______
Witness to the signatureof
_____
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SCHEDULE “F” TO THE AGREEMENT
OPERATIOR’S AGREEMENT
THIS AGREEMENT made this
___________
day of
_____________ _______
AMONG:
_______________________________
a body corporate, having offices at the City of
________________
,inthe of
_______________
(hereinafter referred to as the “Operator”)OF THE FIRST PART
-and-
HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR
(herein referred to as the “Province”)OFTHE SECOND PART
-and-
The parties executing this Agreement as GrantorsOF THE THIRD PART
(herein referred to as the “Grantors”)
WHEREAS the Province and the Grantors are parties to a Royalty Agreement dated
_______________,2O10
relative to the royalty payable on crude oil produced pursuant to PLIOO5 and EL1093, each issued by theCanada-Newfoundland and Labrador Offshore Petroleum Board (which agreement, as may have beenamended, is herein referred to as the “Royalty Agreement”); and
WHEREAS each of the Grantors has granted to and in favour of the Operator a Security Interest in any or all ofits Working Interest in
____________________
(for purposes of this agreement, the “Licence”) or any or all of itsinterest in the Charged Premises or both (such Security Interest and the documents and instrumentsevidencing same being herein referred to as the “Security”);
NOW THEREFORE in consideration of the premises, one dollar ($1.00) and other good and valuableconsideration (receipt whereof is hereby acknowledged) the parties hereby covenant and agree as follows:
1. Definitions
The words and phrases in this Agreement (including the recitals hereto) shall, unless otherwise definedherein, have the same meanings as such words and phrases have in the Royalty Agreement.
2. Subordination
a. The Operator hereby agrees that:
(i) its claim for payment by a Grantor out of any of the Charged Premises or any procedsthereof or therefrom; and
(ii) the Security granted by such Grantor and the rights thereunder;
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are hereby expressly subordinated and postponed to the Security Interests granted by such Grantorto the Province under the Royalty Agreement, the Province’s entitlement to payment out of any ofthe Charged Premises or any proceeds thereof or therefrom of the Royalty Share payable by suchGrantor and the Province’s rights under Articles XIII and XXII of the Royalty Agreement.
b. Upon realization by the Operator upon any or all of the Security granted by a Grantor whichdoes not result in an assignment or transfer of, or vesting of title to, the Working Interest of suchGrantor in the Licence, and until such time as such assignment or transfer or vesting of title occurs,to the extent that the Operator receives any payment pursuant to such realization from anyproceeds due or owing to such Grantor from or in respect of its share of Hibernia CrudeEL1093/PLLOO5, the Province shall be entitled, both before and after the appointment of anyreceiver in respect of the Security, to receive payment of the Royalty Share payable by such Grantorfrom or in respect of such Hibernia Crude EL1093/PLIOO5 before the Operator is entitled toappropriate any such proceeds to its own account. For greater certainty the Royalty Share payableby such Grantor as aforesaid shall include any Royalty Share payable by such Grantor for anyHibernia Crude EL1093/PLIOO5, the proceeds of which have been received by the Operator aftersuch date of enforcement, and which may be payable by such Grantor as a result of anyredetermination, recalculation, audit, annual review and reconciliation or arbitration pursuant tothe provisions of the Royalty Agreement. In addition the Operator acknowledges and recognizesthe right of the Province, at anytime, including during any period of realization by the Operator onany Security granted by such Grantor, to realize upon any Security Interest granted by such Grantorto the Province, to take in kind and dispose of the Royalty Share payable in respect of suchGrantor’s share of Hibernia Crude EL1093/PLIOO5 pursuant to the provisions of the RoyaltyAgreement and to otherwise deal with such Security Interest and such Grantor (including thegranting of waivers, extension and compromises) as the Province sees fit, all without notice oraccount to the Operator and without prejudice to its rights and benefits hereunder.
c. If the Operator shall receive any amount in respect of the Security granted by a Grantor beforethe Province receives payment of the Royalty Share payable by such Grantor as aforesaid, suchamount, to the extent necessary to pay such Royalty Share, shall be held in trust by the Operatorand, after deducting its reasonable costs of collection, shall be forthwith paid over the Province.The foregoing trust obligation of the Operator shall only be with respect to proceeds received by theOperator after such date of enforcement.
d. The Operator hereby postpones all rights of subrogation which it may acquire in respect of thisAgreement or the provisions of Article XIII or XXII of the Royalty Agreement as a result of paymentsreceived by the Province from or instead of the Operator on account of the provisions of thisAgreement to payment in full of the Royalty Share payable by such Grantor to the Province.
e. The Province acknowledges that, to the extent the Operator makes any payment to theProvince of any Royalty Share payable by a Grantor, the Operator shall be subrogated to theSecurity Interest granted to the Province by such Grantor, provided, however, such subrogatedrights shall at all times be postponed as provided in clause 2(d) hereof.
f. The Operator will, as soon as is reasonably practicable, give written notice to the Province ofany proposed assignment or transfer of any of the Working Interest of a Grantor in the Licence as aresult of any realization of any Security granted by such Grantor.
3. Application of Royalty Agreement
a. Upon realization by the Operator on any Security granted by a Grantor which results in anassignment or transfer of, or vesting of title to, all or any of the Working Interest of such Grant,ç inthe Licence to the Operator, the Operator:
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(I) will not register such assignment or transfer under the Federal Accord Act until theProvince has received payment of all amounts for which the Operator is liable pursuant tothe provisions of clause 3(a)(ii) below;
(ii) will be liable to the Province for the payment of that proportion of the Royalty Sharepayable by such Grantor to the Province relative to the period prior to such assignment ortransfer in the same manner and to the same extent as would a Successor to such Grantorpursuant to the provisions of clause 16.12 of the Royalty Agreement if such Grantor were aPredecessor and such Working Interest to be assigned or transferred were a Sold Interest.For the purposes of determining the extent of such liability, the proportion of the RoyaltyShare payable shall be the same proportion as the Working Interest to be assigned ortransferred is of the total Working Interest of such Grantor, and the Operator shall beentitled to request a Royalty Statement from the Province and the provisions of clause16.12 shall apply mutatis mutandis; and
(iii) will, without further act or formality, at all times from and after the date thereof, withrespect to the proportion of the Working Interest acquired by it, be entitled to enjoy allbenefit and advantage to be derived from, and be bound by, observe and perform all of theterms and provisions to be observed and performed by such Grantor under, the RoyaltyAgreement (including, without limitation, the provisions of Article XIII and clause 13.8thereof) to the same extent as if the Operator had been a party thereto in the place andstead of such Grantor. The Operator shall execute or cause to be executed all deeds anddocuments and shall do or cause to be done all things necessary for confirming theSecurity Interests granted to the Province by such Grantor under Article XIII of the RoyaltyAgreement.
b. Upon realization by the Operator upon any Security granted by a Grantor which results in anassignment or transfer of, or vesting of title to, the Working Interest of such Grantor in the Licenceto a Person other than the Operator, the Operator will, prior to or contemporaneously with suchassignment, transfer or vesting, cause such Person to execute and deliver to the Province anagreement which incorporates mutatis mutandis clauses 6 through 11 hereof and pursuant towhich such Person shall covenant and agree that it:
(i) will not register such assignment or transfer under the Federal Accord Act until theProvince has received payment of all amounts for which such Person would be liablepursuant to the provisions of clause 4(a)(ii) below;
(ii) will be liable to the Province for the payment of that proportion of the Royalty Sharepayable by such Grantor to the Province relative to the period prior to such assignment ortransfer in the same manner and to the same extent as would a Successor to such Grantorpursuant to the provisions of clause 16.12 of the Royalty Agreement if such Grantor were aPredecessor and such Working Interest to be assigned or transferred were a Sold Interest.For the purposes of determining the extent of such liability, the proportion of the RoyaltyShare payable shall be the same proportion as the Working Interest to be assigned ortransferred is of the total Working Interest of such Grantor, and such Person shall beentitled to request a Royalty Statement from the Province and the provisions of clause16.12 shall apply mutatis mutandis; and
(iii) will, without further act or formality, at all times from and after the date thereof withrespect to the proportion of the Working Interest acquired by it, be entitled to enjoy allbenefits and advantage to be derived from, and be bound by, observe and perform all ofthe terms and provisions to be observed and performed by such Grantor under, the RoyaltyAgreement (including, without limitation, the provisions of Article XIII and clause 13.8thereof) to the same extent as if such Person had been a party thereto in the plaqe kdstead of such Grantor and further, that it shall execute or cause to be executed aW é4cs
114
and documents and shall do or cause to be done all things necessary for confirming theSecurity granted to the Province by such Grantor under Article XIII of the RoyaltyAgreement.
Upon delivery of such agreement executed by such Person, the Province agrees to execute suchagreement.
4. Substitution for Grantor
a. Upon realization by the Operator upon any of the Security granted by a Grantor which results inan assignment or transfer of, or vesting of title to, all or any part of the Working Interest of suchGrantor in the Licence, such Grantor hereby agrees:
(i) to its substitution and replacement by the Operator as a party to the Royalty Agreementwith respect to all or such part of its Working Interest in the Licence in the circumstancesset forth in clause 3(a) above, and
(ii) to it substitution and replacement by any other Person as a party to the Royalty Agreementwith respect to all or such part of its Working Interest in the Licence in the circumstancesset forth in clause 3(b) above.
5. Assignment of Security
The Operator will not assign or transfer the Security granted by a Grantor, or any part thereof, to any Personunless such Person shall have first assumed the obligations of the Operator hereunder and agreed to be boundby the provisions hereof.
6. Comoliance wIth Royalty Agreement
Operator covenants and agrees with the Province and Grantors, and each of them, that it shall:
(i) comply with each and every provision of the Royalty Agreement which the RoyaltyAgreement requires the Grantors, or any of them, to cause the Operator to comply with;and
(ii) perform or refrain from performing each and every matter which the Royalty Agreementrequires the Grantors, or any of them, to cause the Operator to perform or refrain fromperforming, as the case may be.
7. Counterparts
This Agreement may be executed in one or more counterparts, all of which when executed shallconstitute one and the same agreement.
8. Address of Operator
The address of the Operator for notices under the Royalty Agreement shall be the address set forthbelow; namely:
9. Agent for Service for Operator
For the purposes of clause 38.3 of the Royalty Agreement in the Person whose name is set forth beloas4obe the agent of the Operator to receive on its behalf service of all and any papers which may be serve
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legal proceedings relative to the Royalty Agreement which involve the Province, namely:
10. Governing Law
This Agreement shall be governed by, and construed in accordance with, the laws in force in Newfoundlandand Labrador.
11. Inurement
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respectivesuccessors and assigns.
12. Further Assurances
The Operator shall, at its expense, make, execute and deliver or cause to be made, executed and deliveredall such documents and instruments and do or cause to be done all such things as the Province may at anytime and from time to time reasonably require for the purposes of giving effect to this Agreement including,without limitation, executing postponements of its rights.
IN WITNESS WHEREOF each of the parties of this Agreement have caused this Agreement to be executed bytheir officers or representatives duly authorized in that behalf on the date first above written.
Grantors:
*** ***
Per:
Per:
Per:
Per:
(** )
(** )
(** )
(** )
Per:
Per:
Per:
Per:(** )
HER MAJESTY IN RIGHT OFNEWFOUNDLAND AND LABRADOR
(** )
(** )
(** )
Operator***
Per: Represented by:
/1“I
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116
**
**
o Name of Operator to be inserted before executiono Name and title of officer signing to be inserted before execution• Name of Grantor to be inserted before execution
Completion Instructions
1. Where a Grantor is both the Project Owner and Licensee which is an Affiliate of that Project Owner,then the reference on the first page to the party of the third part which defines Grantors should be areference to both the Project Owner and Licensee.
2. Where a Grantor has granted to the Operator a Security Interest on only part of the Charged Premises,then the reference in the second recital to “the Charged Premises” should be changed to a reference to thespecific properties, assets, rights and things on which such Security Interest was granted.
3. Where a Grantor has not granted to the Operator a Security Interest on any of its Working Interest in aLicence, then the reference in the second recital to “on all of its Working Interest in the Production Licenceand” should be deleted and where a Grantor has not granted to the Operator a Security Interest on any ofits interest in the Charged Premises, then the reference in the second recital to “and on all of its interest inthe Charged Premises” should be deleted.
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SCHEDULE UGn TO THE AGREEMENT
OPERATOR’S ACKNOWLEDGEMENT AG REEMENT
THIS AGREEMENT made this
____________
day of
______________
AMONG:
_________________________________
a body corporate, having offices at the City of
______________________
in the
_______________of ____________________,
(hereinafter referred to asthe “Operator”)
OF THE FIRST PART
-and-
HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR
(herein referred to as the “Province”)
OF THE SECOND PART
WHEREAS the Province, the Project Owners and the Licensees are parties to a Royalty Agreement dated
_______________
2010 relative to the royalty payable on crude oil produced pursuant to PLIOO5 and EL1093issued by the Canada-Newfoundland and Labrador Offshore Petroleum Board (which agreement, as may havebeen amended, is herein referred to as the “Royalty Agreement”); and
WHEREAS the Operator is the agent of the Project Owners and will be conducting operations in respect ofcertain or all of the Licences and has agreed to comply with the provisions of the Royalty Agreement;
NOW THEREFORE in consideration of the premises, one dollar ($1.00) and other good and valuableconsideration (receipt whereof is hereby acknowledged) the parties hereby covenant and agree as follows:
1. DefinItions
The words and phrases in this Agreement (including the recitals hereto) shall, unless otherwise definedherein, have the same meanings as such words and phrases have in the Royalty Agreement.
2. No Security
The Operator, in its own right, on its own behalf or for its own benefit, has no Security Interest in theCharged Premises.
3. Compliance with Royalty AUreement
Operator covenants and agrees with the Province that it shall:
(i) comply with each and every provision of the Royalty Agreement which the RoyaltyAgreement requires the Project Owners, or any of them, to cause the Operator, tocomply with; and
(ii) perform or refrain from performing each and every matter which the Royalty Agreementrequires the Project Owners, or any of them, to cause the Operator, to perform or rfçainfrom performing, as the case may be. I))
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118
4. Counteroarts
This Agreement may be executed in one or more counterparts, all of which when executed shall constituteone and the same agreement.
5. Address of Operator
The address of the Operator for notices under the Royalty Agreement shall be the address set forthbelow; namely:
6. Agent for Service for Ooerator
For the purposes of clause 38.3 of the Royalty Agreement the Person whose name is set forth below is tobe the agent of the Operator to receive on its behalf service of all and any papers which may be served in anylegal proceedings relative to the Royalty Agreement which involve the Province, namely:
7. Governing Law
This Agreement shall be governed by, and construed in accordance with the laws in force in Newfoundlandand Labrador.
8. Inurement
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respectivesuccessors and assigns.
9. Further Assurances
The Operatorshall, at its expense, make, execute and deliver or cause to be made, executed and deliveredall such documents and instruments and do or cause to be done all such things as the Province may at anytime and from time to time reasonably require for the purposes of giving effect to this Agreement including,without limitation, executing postponements of its rights.
IN WITNESS WHEREOF each of the parties of this Agreement have caused this Agreement to be executed bytheir officers or representatives duly authorized in that behalf on the date first above written.
Per:
Per:
(** )
(** )
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119
HER MAJESTY IN RIGHT OFNEWFOUNDLAND AND LABRADOR
Represented by:
(** )
(** )
Name of Operator to be inserted before execution
Name and title of officer signing to be inserted before execution
LY
hAp-Il-, f—i
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120
SCHEDULE UH TO THE AGREEMENT
LOCKED PROVISIONS TO JOA P1 1005 AND EL 1093
Definitions Locked Provisions: JOA P11005
1.1(6) Accounting Procedure
1.1(10) Agreement
1.1(17) Authority for Expenditure or AFE
1.1(20) Board
1.1(22) Budget
1.1(24) Capital Costs
1.1(50) Development Plan
1.1(51) Development Project
1.1(62) Effective Date
1.1(80) Gas
1.1(90) Joint Account
1.1(91) Joint Lands
1.1(92) Jcnt Project
1.1(93) Joint Property
1.1(96) Licence
1.1(98) Management Committee
1.1(103) Month
1.1(115) Oil
1.1(116) Operating Costs
1.1(117) Operation
1.1(124) Owner’s Security
1.1(133) Person
1.1(134) Petroleum Substances
1.1(142) Project AFE
1.1(145) Project Agreements
1.1(146) Project Assets
1.1(147) Project Data
1.1(148) Project Facilities
1.1(149) Project Licence
1.1(156) Receipt Point
121
Definitions Locked Provisions: JOA P11005
1.1(163) Royalty Default
1.1(168) Security Package
1.1(198) Trustee
1.1(214) Working Interest
1.1(215) Year
CIauses
1.4(J) Agreements
Article 3 Scope of Agreement
6.3 Ownership
7.1(A) Representatives
7.3 Authority to Vote
7.14 Vote of Management Committee Binding
9.1(A)(1) Conduct of Operations: Control and Management of Operations
9.1(A)(5) Conduct of Operations: Covenants of Operator
9.2(A) Compliance by Operator
9.3(A)(3) Obligations for Operations: Authorization for Expenditures
9.3(A)(12) Obligations for Operations: Access to Operations
9.3(A)(15) Obligations for Operations: Payment for Operations
9.5 Records
9.6(A) General Reporting
21.1 Joint Account Expenditures
21.2(B) Authorities for Expenditure and Changes in Scope
21.2(B)(1) Authorities for Expenditure and Changes in Scope: Authorizations for
Expenditures
21.2(0) Overexpenditures
21.6 Audit Rights
22.13 Application of Recovered Amounts
22.19 Royalty Default
23.2 Insurance
Schedule C Accounting Procedure
Schedule C, 1.1(R) Project Support Facilities
Schedule C, 1.2 Joint Account Statements
Schedule C, 1.2(B) Expenditures 4249
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122
Definitions Locked Provisions: JOA EL 1093
1.1(6) Accounting Procedure
1.1(10) Agreement
1.1(17) Authority for Expenditure of AFE
1.1(20) Board
1.1(22) Budget
1.1(24) Capital Costs
1.1(51) Development Plan
1.1(52) Development Project
1.1(63) Effective Date
1.1(70) Exploration Licence
1.1(82) Gas
1.1(92) Joint Account
1.1(93) Joint Lands
1.1(94) Joint Project
1.1(95) Joint Property
1.1(98) Licence
1.1(100) Management Committee
1.1(105) Month
1.1(117) Oil
1. 1(118) Operating Costs
1.1(119) Operation
1. 1(126) Owner’s Security
1.1(135) Person
1.1(136) Petroleum Substances
1.1(144) Project AFE
1.1(147) Project Agreements
1. 1(148) Project Assets
1.1(149) Project Data
1.1(150) Project Facilities
1.1(151) Project Licence
1. 1(158) Receipt Point
1.1(165) Royalty Default
1. 1(170) Security Package
!
4249k’-
-.
123
1.1(200)
1.1(216)
1.1(217)
Working Interest
Trustee
Year
Definitions Locked Provisions: JOA EL 1093
Clauses
1.4(J) Agreements
Article 3 Scope of Agreement
6.3 Ownership
7.1(A) Representatives
7.3 Authority to Vote
7.14 Vote of Management Committee Binding
9.1(A)(1) Conduct of Operations: Control and Management of Operations
9.1(A)(5) Conduct of Operations: Covenants of Operator
9.2(A) Compliance by Operator
9.3(A)(3) Obligations for Operations: Authorization for Expenditures
9.3(A)(12) Obligations for Operations: Access to Operations
9.3(A)(15) Obligations for Operations: Payment for Operations
9.5 Records
9.6(A) General Reporting
21.1 Joint Account Expenditures
21.2(B) Authorities for Expenditure and Changes in Scope
21.2(B)(1) Authorities for Expenditure and Changes in Scope: Authorizations for
Expenditures
21.2(C) Overexpenditures
21.6 Audit Rights
22.13 — — Application of Recovered Amounts
22.19 Royalty Default
23.2 Insurance
Schedule C Accounting Procedure
Schedule C, 1.1(R) Project Support Facilities
Schedule C, 1.2 Joint Account Statements
Schedule C, 1.2(B) Expenditures
PARTY
HER MAJESTY IN RIGHT OF NEWFOUNDLAND ANDLABRADOR
EXXONMOBIL CANADA PROPERTIESEXXONMOBIL CANADA LTD.EXXONMOBIL CANADA HIBERNIA COMPANY LTD.
PETRO-CANADA HIBERNIA PARTNERSHIPSUNCOR ENERGY INC.
CHEVRON CANADA RESOURCESCHEVRON CANADA LIMITED
CANADA HIBERNIA HOLDING CORPORATION
MURPHY ATLANTIC OFFSHORE OIL COMPANYLTD.
STATOIL CANADA LTD.
NALCOR ENERGY — OIL AND GAS INC.
The person initialling is indicating that they have participated in,reviewed and will recommend approval of the document
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